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<SEC-DOCUMENT>0000950123-05-000803.txt : 20050127
<SEC-HEADER>0000950123-05-000803.hdr.sgml : 20050127
<ACCEPTANCE-DATETIME>20050127171335
ACCESSION NUMBER:		0000950123-05-000803
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20050121
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
FILED AS OF DATE:		20050127
DATE AS OF CHANGE:		20050127

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN REAL ESTATE PARTNERS L P
		CENTRAL INDEX KEY:			0000813762
		STANDARD INDUSTRIAL CLASSIFICATION:	OPERATORS OF NONRESIDENTIAL BUILDINGS [6512]
		IRS NUMBER:				133398766
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09516
		FILM NUMBER:		05554683

	BUSINESS ADDRESS:	
		STREET 1:		100 SOUTH BEDFORD ROAD
		CITY:			MT KISCO
		STATE:			NY
		ZIP:			10549
		BUSINESS PHONE:		9142427700
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>y05076e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>FORM 8-K</TITLE>
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<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



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<P align="center" style="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>


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<P align="center" style="font-size: 18pt"><B>FORM 8-K</B>


<P align="center" style="font-size: 10pt">CURRENT REPORT<BR>
Pursuant to Section&nbsp;13 OR 15(d) of the<BR>
Securities Exchange Act of 1934



<P align="center" style="font-size: 10pt">Date of Report (Date of Earliest Event Reported): January&nbsp;21, 2005


<P align="center" style="font-size: 24pt"><B>American Real Estate Partners, L.P.</B>


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="75%" align="center" color="#000000"></DIV>


<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>1-9516</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>13-3398766</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of<BR>
incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Commission File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">100 South Bedford Road, Mt. Kisco, NY
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10549</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Registrant&#146;s telephone number, including area code: <B>(914)&nbsp;242-7700</B>



<P align="center" style="font-size: 10pt"><B>N/A</B>


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="26%" align="center" color="#000000"></DIV>


<DIV align="center" style="font-size: 10pt">(Former name or former address, if changed since last report)</DIV>


<P align="left" style="font-size: 10pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:



<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
    <TD>Written communication pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>
</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
    <TD>Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act
(17 CFR 240.14a-12)</TD>
</TR>
</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))</TD>
</TR>
</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))</TD>
</TR>
</TABLE>


<P>
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<HR size="4" noshade color="#000000" style="margin-top: -10px">





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


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<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
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	<TD width="76%"></TD>
</TR>
<TR><TD></TD><TD colspan="8"><A HREF="#000">Item&nbsp;1.01 Entry into a Material Definitive Agreement</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;3.02 Unregistered Sales of Equity Securities</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Exhibit&nbsp;Index</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">Exhibit&nbsp;Index</A></TD></TR>
<TR><TD colspan="9"><A HREF="y05076exv99w1.htm">EX-99.1: MEMBERSHIP INTEREST PURCHASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y05076exv99w2.htm">EX-99.2: AGREEMENT AND PLAN OF MERGER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y05076exv99w3.htm">EX-99.3: AGREEMENT AND PLAN OF MERGER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y05076exv99w4.htm">EX-99.4: PURCHASE AGREEMENT</A></TD></TR>
</TABLE>
</CENTER>
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<P align="left" style="font-size: 10pt"><B>Section&nbsp;1 &#150; Registrant&#146;s Business and Operations</B>


<!-- link2 "Item&nbsp;1.01 Entry into a Material Definitive Agreement" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;1.01 Entry into a Material Definitive Agreement</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we entered into a membership interest purchase agreement with Gascon
Partners, or Gascon, Cigas Corp., or Cigas, and Astral Gas Corp., or Astral, pursuant to which we
will purchase Gascon&#146;s managing membership interest in NEG Holding LLC, or NEG Holding, for a
purchase price of up to 11,344,828 of our depositary units, or
Depositary Units, valued at $29.00 per unit, or an aggregate of up to $329.0&nbsp;million. We refer to
this agreement as the NEG purchase agreement. Gascon, Cigas and Astral are all directly or
indirectly wholly owned by Carl C. Icahn. The purchase price is subject to reduction, based upon
the oil and gas reserve reports for NEG Holding and its subsidiaries as of January&nbsp;21, 2005 to be
prepared by an independent reserve engineering firm. The other member of NEG Holding is National
Energy Group, Inc., or NEG, of which 50.01% is owned by us. The transactions described above require the consent of the bank lenders of NEG Operating,
LLC, or NEG Operating, a wholly-owned subsidiary of NEG Holding. If the parties do not obtain the
consent of NEG Operating&#146;s bank lenders, or refinance NEG Operating&#146;s debt, the parties have agreed
that rather than acquiring Gascon&#146;s membership interest in NEG Holding, we will instead of
acquiring Gascon acquire all of its general partnership interests owned by Cigas and Astral
Gas for the same purchase price described above. The purchase agreement contains customary
representations and warranties, indemnification provisions, covenants regarding the conduct of
business prior to closing and conditions to closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The closing of the transactions contemplated by the NEG purchase agreement is subject to the
satisfaction or waiver of certain conditions, including, for each of the parties, no action or
proceeding by any governmental authority or other person shall have been instituted or threatened
which (1)&nbsp;might have a material adverse effect on Gascon or NEG Holding, as applicable, or (2)
could enjoin, restrain or prohibit, or could result in substantial damages in respect of, any
provision of the purchase agreement or the consummation of the transactions contemplated by the
purchase agreement. The closing of the transactions contemplated by the NEG purchase agreement is
also subject to approval by holders of our depositary units as required by the New York Stock
Exchange. With respect to us, the closing of the transactions contemplated by the NEG purchase
agreement is also subject to (1)&nbsp;the satisfaction or waiver of the condition that no material
adverse change with respect to Gascon or NEG Holding, as applicable, shall have occurred and no
event shall have occurred which, in our reasonable judgment, is reasonably likely to have a
material adverse effect and (2)&nbsp;the receipt of NEG Holding&#146;s oil and gas reserve reports. Gascon
has agreed to indemnify us, up to a maximum liability equal to the purchase price, against, and
agreed to hold us harmless from, any and all losses it incurs associated with any breach of or any
inaccuracy in any representation or warranty made by Cigas and Astral or Gascon, as applicable, in
the purchase agreement, or any breach of or failure by Cigas and Astral to perform any of their
respective covenants or obligations set out or contemplated in the purchase agreement. A company
wholly-owned by Mr.&nbsp;Icahn has agreed to guarantee all the duties and obligations of Gascon under
the NEG purchase agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, National Onshore LP, or National Onshore, the 1% general partnership
interest of which and the 99% limited partnership interest of which are owned, respectively, by two
limited liability companies, each of which is a wholly-owned subsidiary of AREP Oil &#038; Gas LLC,
which is a wholly-owned subsidiary of American Real Estate Holdings Limited Partnership, or AREH, in which we hold a 99% limited partnership interest, entered into an agreement and plan of merger with
Highcrest Investors Corp., or Highcrest, an entity indirectly wholly-owned


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">by Mr.&nbsp;Icahn, and
TransTexas Gas Corporation, or TransTexas, pursuant to which we
will acquire TransTexas. We refer to this agreement as the TransTexas merger agreement. Pursuant
to the TransTexas merger agreement, TransTexas will merge with and into National Onshore, and all
of the common stock of TransTexas will be canceled and cease to exist, and National Onshore will
pay a merger consideration to Highcrest of up to $180.0&nbsp;million in cash. The merger consideration is subject to reduction based upon the oil and gas reserve
reports for TransTexas and its subsidiaries as of January&nbsp;21, 2005 to be prepared by an independent
reserve engineering firm. The TransTexas merger agreement contains customary representations and
warranties, indemnification provisions, covenants regarding the conduct of business prior to
closing and conditions to closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The closing of the transaction contemplated by the TransTexas merger agreement is subject to
the satisfaction or waiver of certain conditions, including, for each of the parties, no action or
proceeding by any governmental authority or other person shall have been instituted or threatened
which (1)&nbsp;might have a material adverse effect on TransTexas or (2)&nbsp;could enjoin, restrain or
prohibit, or could result in substantial damages in respect of, any provision of the merger
agreement or the consummation of the transactions contemplated by the merger agreement. With
respect to National Onshore, the closing of the transactions contemplated by the TransTexas merger
agreement is also subject to (1)&nbsp;the satisfaction or waiver of the condition that no material
adverse change with respect to TransTexas shall have occurred and no event shall have occurred
which, in the reasonable judgment of National Onshore, is reasonably likely to have a material
adverse effect and (2)&nbsp;the receipt of TransTexas&#146; oil and gas reserve reports. Highcrest has agreed
to indemnify National Onshore, up to a maximum liability equal to the purchase price, against, and
agreed to hold it harmless from, any and all losses it incurs associated with any breach of or any
inaccuracy in any representation or warranty made by Highcrest in the merger agreement, or any
breach of or failure by Highcrest to perform any of its covenants or obligations set out or
contemplated in the merger agreement. A company wholly-owned by Mr.&nbsp;Icahn has agree to guarantee
all duties and obligations of Highcrest under the TransTexas merger agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we and National Offshore LP, or National Offshore, the 1% general
partnership interest of which and the 99% limited partnership interest of which are owned,
respectively, by two limited liability companies, each of which is a wholly-owned subsidiary
of ours, entered into an agreement and plan of merger with Highcrest, Arnos Corp., or Arnos, and
Panaco, Inc., or Panaco, pursuant to which Panaco will merge with and into National Offshore and
all of the common stock of Panaco will be canceled and cease to exist, and Highcrest and Arnos will
be paid a merger consideration of up to 4,310,345 Depositary Units, valued at $29.00 per unit, or
an aggregate of up to $125.0&nbsp;million. We refer to this agreement as the Panaco merger agreement.
Highcrest and Arnos are indirectly wholly-owned by Mr.&nbsp;Icahn. The number of Depositary Units to be issued is
subject to reduction based upon the oil and gas reserve reports for Panaco as of January&nbsp;21, 2005
to be prepared by an independent reserve engineering firm.
Immediately following the merger, we will contribute each of the general partner and limited partner interests of National Offshore to
AREH and AREH will contribute such limited partnership interest to AREP Oil &#038; Gas. The Panaco
merger agreement contains customary representations and warranties, indemnification provisions,
covenants regarding the conduct of business prior to closing and conditions to closing.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The closing of the transactions contemplated by the Panaco merger agreement is subject to the
satisfaction or waiver of certain conditions, including, for each of the parties, no action or
proceeding by any governmental authority or other person shall have been instituted or threatened
which (1)&nbsp;might have a material adverse effect on Panaco or (2)&nbsp;could enjoin, restrain or prohibit,
or could result in substantial damages in respect of, any provision of the merger agreement or the
consummation of the transactions contemplated by the merger agreement. The closing of the
transactions contemplated by the Panaco merger agreement is also subject to the approval by the
holders of our Depositary Units, as required by the New York Stock Exchange. With respect to
National Offshore, the closing of the transactions contemplated by the Panaco Merger Agreement is
also subject to (1)&nbsp;the satisfaction or waiver of the condition that no material adverse change
with respect to Panaco shall have occurred and no event shall have occurred which, in the
reasonable judgment of National Offshore, is reasonably likely to have a material adverse effect
and (2)&nbsp;the receipt of Panaco&#146;s oil and gas reserve reports. Highcrest and Arnos have agreed to
indemnify National Offshore, up to a maximum liability equal to the purchase price, against, and
agreed to hold it harmless from, any and all losses it incurs associated with any breach of or any
inaccuracy in any representation or warranty made by Highcrest and Arnos in the merger agreement,
or any breach of or failure by Highcrest and Arnos to perform any of their covenants or obligations
set out or contemplated in the merger agreement. A company wholly-owned by Mr.&nbsp;Icahn has agreed to
guarantee all duties and obligations of Highcrest and Arnos under the Panaco merger agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we entered into a purchase agreement with Cyprus, LLC, or Cyprus,
pursuant to which we will purchase 4,121,033 shares of common stock of GB Holdings, Inc., or GB
Holdings, and 4,121,033 Atlantic Coast Entertainment Holdings, Inc., or Atlantic Holdings, warrants
which are exercisable for an aggregate of 1,133,284 shares of common stock of Atlantic Holdings. We
refer to this agreement as the Sands purchase agreement. Cyprus is
indirectly wholly-owned by Mr.&nbsp;Icahn. The
purchase price to be paid under the Sands purchase agreement for these securities is 413,793
Depositary Units, valued at $29.00 per unit, or an aggregate of $12.0&nbsp;million, plus up to an
additional 206,897 Depositary Units, valued at $29.00 per unit, or an aggregate of $6.0&nbsp;million, to
be paid after closing if Atlantic Holdings meets certain earnings targets during 2005 and 2006.
The Sands purchase agreement contains customary representations and warranties, indemnification
provisions, covenants regarding the conduct of business prior to closing and conditions to closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The closing of the transactions contemplated by the Sands purchase agreement is subject to the
satisfaction or waiver of certain conditions, including, for each of the parties, no action or
proceeding by any governmental authority or other person shall have been instituted or threatened
which (1)&nbsp;might have a material adverse effect on GB Holdings or Atlantic Holdings or (2)&nbsp;could
enjoin, restrain or prohibit, or could result in substantial damages in respect of, any provision
of the purchase agreement or the consummation of the transactions contemplated by the purchase
agreement. The closing of the transactions contemplated by the Sands purchase agreement is also
subject to the approval by holders of our Depositary Units, as required by the New York Stock
Exchange. With respect to us, the closing of the purchase agreement is also subject to the
satisfaction or waiver of the condition that no material adverse change
with respect to GB Holdings or Atlantic Holdings shall have occurred and no event shall have
occurred which, in our reasonable judgment, is reasonably likely to have a material adverse
effect. Cyprus has agreed to indemnify us against, and agreed to hold it harmless from, any and
all losses it incurs associated with any breach of or any inaccuracy in any representation or
warranty made by Cyprus in the purchase agreement, or any breach of or failure by Cyprus to perform
any of its covenants or obligations set out or contemplated in the


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">purchase agreement. A company wholly-owned by Mr.&nbsp;Icahn has agreed to guarantee all duties and
obligations of Cyprus under the Sands purchase agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of the agreements described above, Mr.&nbsp;Icahn indirectly owned approximately
86.5% of our Depositary Units and preferred units and indirectly owned 100% of
our general partner, American Property Investors, Inc., or API. Each of the transactions
described above was approved by the Audit Committee of API. The Audit Committee was advised as to
each transaction by independent financial advisors and by legal counsel. The Audit Committee
obtained fairness opinions to the effect that, as of January&nbsp;21, 2005, the consideration to be paid
by us or our subsidiaries, as applicable, was fair, from a financial point of view, to us.


<P align="left" style="font-size: 10pt"><B>Section&nbsp;3 &#150; Securities and Trading Markets</B>


<!-- link2 "Item&nbsp;3.02 Unregistered Sales of Equity Securities" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;3.02 Unregistered Sales of Equity Securities</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we agreed to issue 11,344,828 Depositary Units to Gascon, on the terms
described above, pursuant to the NEG purchase agreement attached hereto as Exhibit&nbsp;99.1.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we agreed to issue 4,310,345 Depositary Units to Highcrest and Arnos,
on the terms described above, pursuant to the Panaco merger agreement attached hereto as Exhibit
99.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2005, we agreed to issue 413,793 Depositary Units to Cyprus, with up to an
additional 206,897 Depositary Units if GB Holdings meets certain earnings targets during 2005 and
2006, on the terms described above, pursuant to the Sands purchase agreement attached hereto as
Exhibit&nbsp;99.4.

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<DIV align="left"><A NAME="002"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Exhibit&nbsp;Index</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.1&nbsp;&nbsp;</TD>
    <TD>Membership Interest Purchase Agreement, dated January&nbsp;21, 2005, by and among
American Real Estate Partners, L.P. as Purchaser and Gascon Partners, as Seller.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.2&nbsp;&nbsp;</TD>
    <TD>Agreement and Plan of Merger, dated January&nbsp;21, 2005, by and among National
Onshore LP, Highcrest Investors Corp. and TransTexas Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.3&nbsp;&nbsp;</TD>
    <TD>Agreement and Plan of Merger, dated January&nbsp;21, 2005, by and among National
Offshore LP, Highcrest Investors Corp., Arnos Corp., American Real Estate Partners,
L.P. and Panaco, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.4&nbsp;&nbsp;</TD>
    <TD>Purchase Agreement, dated January&nbsp;21, 2005, by and among American Real Estate
Partners, L.P., as Purchaser, and Cyprus, LLC as Seller.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt">&#091;remainder of page intentionally left blank; signature page follows&#093;




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center" style="font-size: 10pt">SIGNATURES



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">AMERICAN REAL ESTATE PARTNERS, L.P.<BR>
(Registrant)<BR>
<BR>
By: American Property Investors, Inc.<BR>
General Partner<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ John P. Saldarelli
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">John P. Saldarelli&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President, Chief Financial<br>
Officer, Secretary and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="left" style="font-size: 10pt">Date: January&nbsp;26, 2005




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "Exhibit&nbsp;Index" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center" style="font-size: 10pt"><B>Exhibit&nbsp;Index</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.1&nbsp;&nbsp;</TD>
    <TD>Membership Interest Purchase Agreement, dated January&nbsp;21, 2005, by and among American Real
Estate Partners, L.P. as Purchaser and Gascon Partners, as Seller.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.2&nbsp;&nbsp;</TD>
    <TD>Agreement and Plan of Merger, dated January&nbsp;21, 2005, by and among National Onshore LP,
Highcrest Investors Corp. and TransTexas Corporation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.3&nbsp;&nbsp;</TD>
    <TD>Agreement and Plan of Merger, dated January&nbsp;21, 2005, by and among National Offshore LP,
Highcrest Investors Corp., Arnos Corp., American Real Estate Partners, L.P. and Panaco, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">99.4&nbsp;&nbsp;</TD>
    <TD>Purchase Agreement, dated January&nbsp;21, 2005, by and among American Real Estate Partners, L.P.,
as Purchaser, and Cyprus, LLC as Seller.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>y05076exv99w1.htm
<DESCRIPTION>EX-99.1: MEMBERSHIP INTEREST PURCHASE AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>EXHIBIT 99.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">EXHIBIT 99.1



<P align="center" style="font-size: 10pt">MEMBERSHIP INTEREST PURCHASE AGREEMENT



<P align="center" style="font-size: 10pt">Dated as of January&nbsp;21, 2005



<P align="center" style="font-size: 10pt">by and among



<P align="center" style="font-size: 10pt">American Real Estate Partners, L.P., as Purchaser,



<P align="center" style="font-size: 10pt">and



<P align="center" style="font-size: 10pt">Gascon Partners, as Seller




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>Table of Contents</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Page</B>
</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE I</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">SALE OF MEMBERSHIP INTEREST AND CLOSING</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase and Sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions at the Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Treatment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE II</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES OF SELLER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Seller</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Partnership Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consents and Approvals</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brokers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE III</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES  OF SELLER RELATING TO THE COMPANY AND THE SUBSIDIAIRIES</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization of Company and the Subsidiaries; Status</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Adverse Effects or Changes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims Against Officers and Directors</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undisclosed Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Related Parties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Matters</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employees, Labor Matters, etc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Benefit Plans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.17</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">i&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.18</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Personal Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.19</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contracts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.20</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.21</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.22</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oil and Gas Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IV</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES OF PURCHASER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Purchaser</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE V</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Business Prior to Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Efforts to Consummate Transaction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VI</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ASSIGNMENT AND ASSUMPTION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VII</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by Seller</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Seller&#146;s Certificates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Adverse Change</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Reserve Reports</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VIII</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by Purchaser</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchaser&#146;s Certificate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Required Lenders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">ii&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approval</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Limited Partnership Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IX</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TERMINATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effect of Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">INDEMNIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnification by Seller</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Third Party Claims; Assumption of Defense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Settlement or Compromise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Failure of Indemnifying Person to Act</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Character</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE XI</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"> DEFINITIONS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Defined Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE XII</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">   MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations and Warranties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Third Party Beneficiary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment; Binding Effect</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalid Provisions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Jury Trial</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent to Jurisdiction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">iii&nbsp;
</DIV>

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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

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    <TD><DIV style="margin-left:15px; text-indent:-15px">12.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
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</DIV>


<P align="center" style="font-size: 10pt">iv&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the or this &#147;Agreement&#148;) dated as of January&nbsp;21,
2005 is made and entered into by and among Gascon Partners, a New York general partnership
(&#147;Seller&#148;), and American Real Estate Partners, L.P., a Delaware limited partnership (&#147;Purchaser&#148;).
Capitalized terms not otherwise defined herein have the meanings set forth in Article&nbsp;XI.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Seller owns a membership interest (the &#147;Membership Interest&#148;) in NEG Holding LLC, a
Delaware limited liability company (the &#147;Company&#148;) as described in that certain Operating Agreement
for the Company dated as of May&nbsp;1, 2001 (&#147;Operating Agreement&#148;), and Purchaser desires to purchase
the Membership Interest from Seller on the terms and subject to the conditions set forth in this
Agreement; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Seller desires to sell the Membership Interest to Purchaser on the terms and subject
to the conditions set forth in this Agreement;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


<P align="center" style="font-size: 10pt"><B>ARTICLE I<BR>
SALE OF MEMBERSHIP INTEREST AND CLOSING</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Purchase and Sale</U>. Seller hereby agrees to sell to Purchaser the Membership
Interest and Purchaser hereby agrees to purchase from Seller the Membership Interest at the Closing
on the terms and subject to the conditions set forth in this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Purchase Price</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The purchase price for the Membership Interest shall be determined in accordance with
Section&nbsp;1.2(c) (the &#147;Purchase Price&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;On or before the fifth Business Day prior to the anticipated Closing Date (the &#147;Closing
Statement Date&#148;), Seller will deliver to Purchaser (i)&nbsp;true and correct copies of the 2004 Reserve
Reports, and (ii)&nbsp;a statement (the &#147;Closing Statement&#148;), certified by the managing general partner
of Seller, setting forth



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A good faith estimate of the volume of any oil or natural gas production imbalance
owed by the Company and the Subsidiaries as of December&nbsp;31, 2004 (collectively, the
&#147;Imbalance&#148;);



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A good faith estimate of the value of the Imbalance, net of royalties, taxes,
overriding royalties and other burdens (the &#147;Imbalance Value&#148;); and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a calculation of the Purchase Price determined in accordance with Section&nbsp;1.2(c).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All statements, reports, materials and other supporting documentation delivered under this
Section&nbsp;1.2(b) shall be in form and content reasonably satisfactory to Purchaser;


<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the Purchase Price shall be 11,344,828 depositary units representing limited partnership
interests of Purchaser (&#147;AREP Units&#148;), provided that:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Purchase Price shall be decreased by a number of AREP Units equal in value to
the Imbalance Value.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Adjusted Purchase Amount is less than $329&nbsp;million, the Purchase Price
shall be decreased by a number of AREP Units equal in value to the amount of such
difference; <U>provided</U> that if the &#147;Adjusted Purchase Amount&#148; pursuant to the Panaco
Agreement exceeds $125&nbsp;million and/or the &#147;Adjusted Purchase Amount&#148; pursuant to the
TransTexas Agreement exceeds $180&nbsp;million, the amount of such excess shall be applied to
reduce the reduction of the Purchase Price hereunder except to the extent any such excess
has been applied to reduce the reduction of the &#147;Merger Price&#148; pursuant to the Panaco
Agreement or the TransTexas Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this Section&nbsp;1.2(c), the value of an AREP Unit shall be $29.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Closing</U>. Upon the terms and subject to the conditions of this Agreement, the
closing of the transactions contemplated hereby (the &#147;Closing&#148;) shall take place (a)&nbsp;at the offices
of Purchaser, located at 100 South Bedford Road, Mt. Kisco, NY at 10:00 a. m., local time, on the
second business day immediately following the day on which the last to be satisfied or waived of
the conditions set forth in Articles VII and VIII (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions)
shall be satisfied or waived in accordance herewith or (b)&nbsp;at such other time, date or place as
Purchaser and Seller may agree. The date on which the Closing occurs is herein referred to as the
&#147;Closing Date&#148;.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Actions at the Closing</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;At the Closing: (i)&nbsp;Purchaser shall deliver to Seller one or more certificates
representing the AREP Units constituting the Purchase Price, (ii)&nbsp;Purchaser, Seller, the Company,
AREH, AREP Oil and Gas and AREP/NEG MGP LLC shall enter into an Assignment Agreement in the form of
<U>Exhibit&nbsp;A </U>attached hereto (the &#147;<U>Assignment Agreement</U>&#148;) pursuant to which Seller
shall assign all of the limited liability company interests in the Company through Purchaser to
AREH, from AREH to AREP Oil and Gas, and from AREP Oil and Gas to AREP/NEG MGP LLC and AREP/NEG MGP
LLC shall be admitted as a member of the Company, (iii)&nbsp;Seller shall deliver or cause to be
delivered to Purchaser the certificate described in Section&nbsp;7.3, and (iv)&nbsp;Purchaser shall deliver
or cause to be delivered to Seller the items required by Sections&nbsp;8.3 and 8.6.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;In the event that the parties fail to obtain the written consent of the Required Lenders
(as defined in the Mizuho Pledge Agreement) with respect to the sale of the Membership Interest as
set forth herein, and the parties shall not have entered into the documentation contemplated in
Section&nbsp;5.2(a) hereof, then Purchaser shall either (x)&nbsp;refinance the loans under the Mizuho Credit
Documents with loans that permit such transactions and proceed to purchase the Membership Interest
as contemplated herein, or (y)&nbsp;rather than
purchasing the Membership Interest as contemplated herein, instead purchase at the Closing all
of the partnership interest in Seller <U>(the </U>&#148;Alternative Transaction&#148;) in accordance with
the terms

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">of a purchase agreement (the &#147;Substitute Agreement&#148;) substantially in the same form as
this Agreement, except that:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Substitute Agreement will provide that Cigas Corp. (&#147;Cigas&#148;), a Delaware
corporation that holds a managing general partnership interest in Seller (the &#147;Managing GP
Interest&#148;), and Astral Gas Corp. (&#147;Astral&#148; and together with Cigas, the &#147;Alternative
Sellers&#148;), a Delaware corporation that holds a general partnership interest in Seller (the
&#147;GP Interest&#148; and together with the Managing GP Interest, the &#147;GP Interests&#148;), shall sell
the GP Interests to Purchaser for the Purchase Price; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Substitute Agreement will contain representations and warranties of the
Alternative Sellers relating to themselves, Seller and the sale of the GP Interests that are
appropriate for a transactions of this type; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) this Agreement will terminate upon the closing of the transactions contemplated
by the Substitute Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;In the event that Purchaser determines to proceed with the Alternative Transaction, it
shall provide written notice thereof to Seller on or prior to the Closing Statement Date (the
&#147;Section&nbsp;1.4 Notice&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Tax Treatment. </U>The Sellers and AREP agree and acknowledge that the sale of the
Membership Interest to Purchaser shall qualify as a nonrecognition transaction pursuant to Section
721(a) of the Internal Revenue Code of 1986, as amended.


<P align="center" style="font-size: 10pt"><B>ARTICLE II<BR>
REPRESENTATIONS AND WARRANTIES OF SELLER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to Purchaser to enter into this Agreement, Seller hereby makes the following
representations and warranties to Purchaser:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Organization of Seller</U>. Seller is a general partnership duly organized, validly
existing and in good standing under the Laws of the State of New York. Seller has full
organizational power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby, including without
limitation, to sell and transfer (pursuant to this Agreement) the Membership Interest.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Partnership Authority</U>. The execution and delivery by Seller of this Agreement,
and the performance by Seller of its obligations hereunder, have been duly and validly authorized
by Seller&#146;s Managing General Partner and no other action on the part of Seller or its Managing
General Partner is necessary for such execution, delivery or performance. This Agreement has been
duly and validly executed
and delivered by Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Title</U>. The delivery of the Assignment Agreement and other instruments of transfer
delivered by Seller to Purchaser at the Closing will transfer to Purchaser good and valid


<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">title to
the Membership Interest, free and clear of all Liens other than Liens created by Purchaser and the
Bank of Texas Lien.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>No Conflicts</U>. Except for any conflict relating to the matters for which the
Proposed Consent is being sought, the execution and delivery by Seller of this Agreement do not,
and the performance by Seller of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with or result in a violation or breach of any of the terms, conditions or
provisions of the organizational documents of Seller, the Company, or any of the Subsidiaries;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with or result in a violation or breach of any term or provision of any Law or
Order applicable to Seller, the Company, or any of the Subsidiaries, or any of the Assets and
Properties of Seller, the Company, or any of the Subsidiaries; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Seller, the Company, or any of the
Subsidiaries to obtain any consent, approval or action of, make any filing with or give any notice
to any Person as a result or under the terms of, (iv)&nbsp;result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to, or (v)&nbsp;result in the
creation or imposition of any Lien upon Seller, the Company, or any of the Subsidiaries or any of
the Assets and Properties of Seller, the Company, or any of the Subsidiaries under, any Contract or
License to which Seller, the Company or any of the Subsidiaries is a party or by which any of the
Assets and Properties of Seller, the Company or any of the Subsidiaries, is bound.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Consents and Approvals</U>. Except for (i)&nbsp;any consent, authorization or approval
relating to the matters for which the Proposed Consent is being sought, (ii)&nbsp;the approval of
depositary unit holders of the Purchaser required by the New York Stock Exchange, and (iii)
approvals to amend the Purchaser&#146;s amended and restated agreement of limited partnership, dated as
of May&nbsp;12, 1987, as amended, as contemplated by Section&nbsp;8.8 hereof, no consent, authorization or
approval of, filing or registration with, or cooperation from, any Governmental Authority or any
other Person not a party to this Agreement is necessary in connection with the execution, delivery
and performance by Seller of this Agreement or the consummation of the transactions contemplated
hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Brokers</U>. Neither Seller nor the Company nor any Subsidiary has used any broker or
finder in connection with the transactions contemplated hereby, and neither Purchaser nor any
Affiliate of Purchaser has or shall have any liability or otherwise suffer or incur any Loss as a
result of or in
connection with any brokerage or finder&#146;s fee or other commission of any Person retained or
purporting to be retained by Seller or by the Company or any Subsidiary in connection with any of
the transactions contemplated by this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Company, any Subsidiary or Seller to Purchaser or any representative or Affiliate of
Purchaser in connection with this Agreement or any of the transactions contemplated hereby contains
or will contain any untrue statement of a material fact or omits or will omit to state a


<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">material
fact necessary to make the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.

<P align="center" style="font-size: 10pt"><B>ARTICLE III</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES<BR>
OF SELLER RELATING TO THE COMPANY AND THE SUBSIDIAIRIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to Purchaser to enter into this Agreement, Seller hereby makes the following
representations to Purchaser, except as set forth in the Disclosure Schedule attached to this
Agreement (it being agreed that any exceptions to such representations and warranties shall clearly
identify the sections of this Agreement to which they apply).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Due Organization of Company and the Subsidiaries; Status</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and each of the Subsidiaries is duly organized and validly existing under the
laws of the state in which it is incorporated or organized, as the case may be, with all requisite
power and authority to own, lease and operate its properties and to carry on its business as they
are now being owned, leased, operated and conducted. The Company and each of the Subsidiaries is
licensed or qualified to do business and is in good standing (where the concept of &#147;good standing&#148;
is applicable) as a foreign corporation in each jurisdiction where the nature of the properties
owned, leased or operated by it and the business transacted by it require such licensing or
qualification (except, with respect to the Subsidiaries, where the failure to be so licensed or
qualified or be in good standing will not in the aggregate adversely affect the validity or
enforceability of this Agreement or have a Material Adverse Effect on any of the Subsidiaries).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Seller has delivered to Purchaser true, correct and complete copies of the
organizational documents of the Company and the Subsidiaries, which organizational documents are in
full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Capitalization</U>. Immediately prior to the Closing, the Seller will own the
Membership Interest, free and clear of all Liens other than the Bank of Texas Lien. Immediately
prior to the Closing, the
Company will own 100% of the limited liability company interests of each of the Subsidiaries,
free and clear of all Liens other than Liens existing pursuant to the Mizuho Credit Documents. No
Person holds any option, warrant, convertible security or other right to acquire any interest in
the Company or any of the Subsidiaries. There are no obligations, contingent or otherwise, of the
Company or the Subsidiaries to repurchase, redeem or otherwise acquire any ownership interests of
the Company or any Subsidiary or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in any Subsidiary or any other Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Subsidiaries</U>. The Company has no subsidiaries other than NEG Operating LLC, Shana
National LLC, a Delaware limited liability company (&#147;Shana&#148;), NGX Energy Limited Partnership, a
Delaware limited partnership, NGX GP of Delaware LLC, a Delaware limited liability company, and NGX
LP of Delaware LLC, a Delaware limited liability company. NEG Operating LLC has no subsidiaries
other than Shana, NGX GP of Delaware LLC and NGX LP of Delaware LLC. Shana has no subsidiaries.
NGX GP of Delaware LLC is the general partner,

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<P align="left" style="font-size: 10pt">and NGX LP of Delaware LLC is the limited partner,
of NGX Energy Limited Partnership. NGX Energy Limited Partnership has no subsidiaries. Except for
its interests in the Subsidiaries, neither the Company nor any of the Subsidiaries owns directly or
indirectly any ownership or other investment interest, either of record, beneficially or equitably,
in any Person.<BR>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Financial Statements</U>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Seller has delivered to Purchaser true, correct and complete copies of the Audited
Financial Statements. The Audited Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position, assets, liabilities and retained
earnings of the respective companies as of the dates thereof and the revenues, expenses, results of
operations, and cash flows of the respective companies for the periods covered thereby. The
Audited Financial Statements are in accordance with the books and records of the respective
companies, do not reflect any transactions which are not bona fide transactions and do not contain
any untrue statement of a material fact (whether or not required to be disclosed under GAAP) or
omit to state any material fact necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Seller has delivered to Purchaser true and complete copies of the Interim 2004
Financial Statements. The Interim 2004 Financial Statements present fairly the financial position,
assets, liabilities and retained earnings of the respective companies as of the dates thereof and
the revenues, expenses, results of operations, and cash flows of the respective companies for the
periods covered thereby. The Interim 2004 Financial Statements are in accordance with the books
and records of the respective companies, do not reflect any transactions which are not bona fide
transactions and do not contain any untrue statement of a material fact (whether or not required to
be disclosed under GAAP) or omit to state any material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>No Adverse Effects or Changes</U>. Since December&nbsp;31, 2003, (i)&nbsp;neither the Company nor any of the Subsidiaries has suffered any
Material Adverse Effect; (ii)&nbsp;there has been no change, event, development, damage or circumstance
affecting the Company or the Subsidiaries that, individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect on the Company or any of the Subsidiaries; (iii)
there has not been any change by the Company or any of the Subsidiaries in its accounting methods,
principles or practices, or any revaluation by the Company or any of the Subsidiaries of any of its
assets, including writing down the value of inventory or writing off notes or accounts receivable;
and (iv)&nbsp;the Company and each of the Subsidiaries has conducted its business only in the ordinary
course of business consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 <U>Title to Properties</U>. Each of the Company and the Subsidiaries has good and
marketable title to, and each Subsidiary is the lawful owner of, all of the tangible and intangible
assets, properties and rights used in connection with its respective businesses and all of the
tangible and intangible assets, properties and rights reflected in the Financial Statements, except
for changes accruing in the ordinary course of business that would not, individually or in the
aggregate, adversely affect the ability of the Company or any of the Subsidiaries to conduct its
business in the ordinary course, consistent with past practice.




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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <U>Litigation</U>. Except as disclosed in the Financial Statements, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations, with such exceptions as are individually, or in the aggregate, not
material in nature or amount, pending or, to the Knowledge of Seller, threatened against or
affecting the Company, the Subsidiaries or any of their respective officers, directors, employees
or agents in their capacity as such, or any of the Company&#146;s Assets and Properties or businesses of
the Company or any of the Subsidiaries, and to Seller&#146;s Knowledge, any facts or circumstances which
may give rise to any of the foregoing. Except as disclosed in the Financial Statements,


<P align="left" style="font-size: 10pt">neither the Company nor any of the Subsidiaries is subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 <U>Claims Against Officers and Directors</U>. There are no pending or, to the Seller&#146;s
Knowledge, threatened claims against any director, officer, employee or agent of the Company, the
Subsidiaries or any other Person, which could give rise to any claim for indemnification against
the Company or the Subsidiaries or cause the Company or the Subsidiaries to incur any material
liability or otherwise suffer or incur any material Loss.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 <U>Insurance</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries maintain insurance policies that provide adequate and
suitable insurance coverage for the business of the Company and the Subsidiaries and are on such
terms, cover such risks and are in such amounts as the insurance customarily carried by comparable
companies of established reputation similarly situated and carrying on the same or similar
business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, Seller has delivered to Purchaser all insurance policies
(including policies providing property, casualty, liability, workers&#146; compensation, and bond and
surety arrangements) under which the Company and the Subsidiaries are an insured, a named insured
or otherwise the principal beneficiary of coverage. All insurance policies of the Company and the
Subsidiaries are in full force and effect. Neither the Company nor the Subsidiaries has received
notice of any refusal of coverage with respect to an existing policy. The Company and the
Subsidiaries have paid all premiums due under all such policies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <U>Compliance with Law</U>. Except as set forth in the Financial Statements, the
Company and the Subsidiaries are in compliance and, at all times, have been in compliance in all
respects with all applicable Laws relating to the Company or the Subsidiaries or their respective
Assets and Properties or businesses. Except as disclosed in the Financial Statements, no
investigation or review by any governmental authority or self-regulatory authority is pending or,
to Seller&#146;s Knowledge, threatened, nor has any such authority indicated orally or in writing to the
Seller, the Company or any of the Subsidiaries an intention to conduct an investigation or review
of the Company or any of the Subsidiaries or, with respect to the Company or any of the
Subsidiaries, or Seller.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <U>Undisclosed Liabilities</U>. Except as disclosed in the Financial Statements,
neither the Company nor any of the Subsidiaries has any material liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to
become due, other than liabilities and obligations incurred after September&nbsp;30, 2004 in the
ordinary course of business consistent with past practice (including as to amount and nature).




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<P align="left" style="font-size: 10pt"><P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12 <U>Related Parties</U>. Except as disclosed in the Financial Statements or on Schedule
3.12 and except for transactions solely between the Company and the Subsidiaries or solely between
the Company&#146;s Subsidiaries, (i)&nbsp;no Affiliate of the Company is a party to any Contract with the
Company or any of the Subsidiaries; (ii)&nbsp;no Affiliate of the Company owes any material amount of
money to, nor is such Affiliate owed any material amount of money by, the Company or any of the
Subsidiaries, (iii)&nbsp;neither the Company nor any of the Subsidiaries has, directly or indirectly,
guaranteed or assumed any indebtedness for borrowed money or otherwise for the benefit of an
Affiliate of the Company or any of the Subsidiaries; and (iv)&nbsp;neither the Company
nor any of the Subsidiaries has made any material payment to, or engaged in any material transaction with, an
Affiliate of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13 <U>Intellectual Property</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries own, or possess adequate rights to use, all material
patents, trade names, trademarks, copyrights, inventions, processes, designs, formulae, trade
secrets, know-how, seismic data and other intellectual property rights necessary for, used or held
for use in the conduct of their businesses. All material intellectual property necessary for used
or held for use in the conduct of the businesses of the Company and any of the Subsidiaries has
been duly registered with, filed in or issued by the relevant filing offices, domestic or foreign,
to the extent necessary or desirable to ensure full protection under any applicable Law, and such
registrations, filings or issuances remain in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The conduct of the business of the Company and the Subsidiaries does not infringe or
otherwise conflict with any rights of any Person in respect of intellectual property rights. None
of the intellectual property rights owned by the Company or the Subsidiaries is being infringed or
otherwise, in any way, used or available for use by any Person without a license or permission from
the Company and the Subsidiaries and neither the Company nor any of the Subsidiaries has taken or
omitted to take any action which would have the effect of waiving any of its rights thereunder.
Neither the Company nor any of the Subsidiaries has received a claim of infringement or conflict by
any third party in respect of any intellectual property used by the Company or the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.14 <U>Environmental Matters</U>. Except as set forth in the disclosure documents of NEGI
filed publicly with the U.S. Securities and Exchange Commission (the &#147;SEC&#148;) prior to the date
hereof, or as set forth in the Financial Statements:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and each of the Subsidiaries have obtained all material Environmental Permits
that are required with respect to their respective Assets and Properties and businesses, either
owned or leased;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Company, each of the Subsidiaries, and their respective Assets and Properties and
businesses, are and have been in compliance in all material respects with all terms and conditions
of all applicable Environmental Laws and Environmental Permits;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no Environmental Claims pending or, to the knowledge of Seller, threatened
against the Company or any of the Subsidiaries. Neither the Company nor any of the Subsidiaries
has received any notice from any Governmental or Regulatory Authority or any person of any
violation or liability arising under any Environmental Law or Environmental Permit in connection
with its Assets and Properties, businesses or operations;




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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the Company, nor any of its Subsidiaries, nor any other Person has caused or taken
any action that will result in any material liability, obligation or cost on the part of the
Company or any of its Subsidiaries relating to (x)&nbsp;environmental conditions on, above, under or
from any properties or assets currently or formerly owned, leased, operated or used by the Company
or any of its Subsidiaries, or (y)&nbsp;the past or present use, management, transport, treatment,
generation, storage, disposal, release or threatened release of Hazardous Materials.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Neither the Company nor any of the Subsidiaries owns, leases or operates or has owned,
leased or operated, any property listed on the National Priorities List pursuant to

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">CERCLA or on the CERCLIS or on any other federal or state list as sites requiring investigation or cleanup;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Company nor any of the Subsidiaries is transporting, has transported, or is
arranging for the transportation of, any Hazardous Material to any location which is listed on the
National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state
list or which is the subject of federal, state or local enforcement actions or other investigations
that may lead to material claims against the Company or the Subsidiaries for investigative or
remedial work, damage to natural resources, property damage or personal injury including claims
under CERCLA;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;There are no sites, locations or operations at which the Company or any of the
Subsidiaries is currently undertaking, or has completed, any investigative, remedial, response or
corrective action as required by Environmental Laws;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;There are no physical or environmental conditions existing on any property owned or leased
by the Company or the Subsidiaries resulting from their respective operations or activities, past
or present, at any location, that would give rise to any material on-site or off-site investigative
or remedial obligations or any corrective action under any applicable Environmental Laws; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Seller has provided to Purchaser all material environmental site assessments, audits,
investigations and studies in its possession, custody or control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.15 <U>Employees, Labor Matters, etc</U>. Except as set forth in the Financial Statements,
neither the Company nor any of the Subsidiaries is a party to or bound by, and none of their
employees is subject to, any collective bargaining agreement, and there are no labor unions or
other organizations representing, purporting to represent or attempting to represent any employees
employed by the Company or any of the Subsidiaries. There has not occurred or been threatened any
material strike, slow down, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees of the Company or any of the Subsidiaries.
There are no labor disputes currently subject to any grievance procedure, arbitration or litigation
and there is no representation petition pending or threatened with respect to any employee of the
Company or any of the Subsidiaries. The Company and the Subsidiaries have complied with all
applicable Laws pertaining to the employment or termination of employment of their respective
employees, including, without limitation, all such Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited discrimination or distinction and
other similar employment activities; except for any failure to

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<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">comply that, individually and in the
aggregate, is not reasonably likely to result in any Company Material Adverse Effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.16 <U>Employee Benefit Plans</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as set forth in the Financial Statements or accrued thereafter in accordance with
the terms of the Plans as of the date hereof, neither the Company nor any of the Subsidiaries has
incurred any material liability, and no event, transaction or condition has occurred or exists that
could result in any material liability, on account of any Plans, including but not limited to
liability for (i)&nbsp;additional contributions required to be made under the terms of any Plan or its
related trust, insurance contract or other funding arrangement with respect to periods ending on or
prior to the date hereof which are not reflected, reserved against or accrued
 in the Financial Statements; (ii)&nbsp;breaches by the Company or any of the Subsidiaries, or any of their employees,
officers, directors, stockholders, or, to the knowledge of Seller, the trustees under the trusts
created under the Plans, or any other Persons under ERISA or any other applicable Law; or (iii)
income taxes by reason of non-qualification of the Plans. Each of the Plans has been operated and
administered in all material respects in compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. Since September&nbsp;30, 2004, neither the Company nor any
of the Subsidiaries has communicated to any current or former director, officer, employee or
consultant thereof any intention or commitment to amend
or modify any Plan, or to establish or implement any other employee or retiree benefit or
compensation plan or arrangement, which would materially increase the cost to the Company or any
Subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Each Plan which is intended to be &#147;qualified&#148; within the meaning of section 401(a) of the
Code, and the trust (if any) forming a part thereof has received a favorable determination letter
or is covered by an opinion letter from the Internal Revenue Service and no event has occurred and
no condition exists which could reasonably be expected to result in the revocation of any such
determination. All amendments and actions required to bring each Plan into conformity with the
applicable provisions of ERISA, the Code, and any other applicable Laws have been made or taken.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no pending or threatened claims (and no facts or circumstances exist that could
give rise to any such claims) by or on behalf of any participant in any of the Plans, or otherwise
involving any such Plan or the assets of any Plan, other than routine claims for benefits in the
ordinary course. The Plans are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of Labor, or any other
Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;None of the Plans provides benefits of any kind with respect to current or former
employees, officers, or directors (or their beneficiaries) of the Company and the Subsidiaries
beyond their retirement or other termination of employment, other than (<U>i</U>) coverage for
benefits mandated by Section&nbsp;4980B or the Code, (<U>ii</U>) death benefits or retirement benefits
under an employee pension benefit plan (as defined by section 3(2) of ERISA), or (<U>iii</U>)
benefits, the full cost of which is borne by such current or former employees, officers, directors,
or beneficiaries.




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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;No Plan sponsored by the Company and the Subsidiaries is a &#147;multiemployer plan&#148; within the
meaning of Section&nbsp;4001(a)(3) of ERISA or a &#147;multiple employer plan&#148; as addressed in section 4063
or 4064 of ERISA. No Plan sponsored by the Company and the Subsidiaries is subject to Title IV of
ERISA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The consummation of the transactions contemplated by this Agreement will not (alone or in
combination with any other event, including, without limitation, the passage of time) result in (i)
any payment (including, without limitation, severance, unemployment compensation, golden parachute,
bonus payments or otherwise) becoming due under any agreement or oral arrangement to any current or
former director, officer, employee or consultant of the Company and the Subsidiaries, (ii)&nbsp;any
increase in the amount of salary, wages or other benefits payable to any director, officer,
employee or consultant of the Company and the Subsidiaries, or (iii)&nbsp;any acceleration of the
vesting or timing of payment of any benefits or compensation (including, without limitation, any
increased or accelerated funding obligation) payable to any director, officer, employee or
consultant of the Company and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.17 <U>Real Property</U>. Schedule&nbsp;3.17 contains a legal description of each parcel of real
property, leases in real property, or other interests in real property, (including the address
thereof) and a legal description of each parcel in which the Company and any of the Subsidiaries
hold a valid easement to use such parcel (the &#147;Real Property&#148;). The Company or a Subsidiary, as
applicable, has Good and Defensible Title to, or a valid and subsisting leasehold estate, or
easement, in each such parcel of Real Property, free and clear of all Liens other than Permitted
Encumbrances. All of the real property leases in the Real Property are valid, binding, and
enforceable in accordance with their terms, and are in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.18 <U>Tangible Personal Property</U>. The Company or a Subsidiary is in possession of and
has good title to, or have valid leasehold interests in or valid rights under contract to use, all
of the real and personal property used or held for use in the business of the Company or the
Subsidiaries, including the interest of the Company or a Subsidiary in all wells, well and
leasehold equipment, pipelines, platforms, facilities, improvements, goods and other personal
property located on or used in connection with the Real Property (the &#147;Fixtures and Equipment&#148;).
All the Fixtures and Equipment is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable Laws. All of the
Fixtures and Equipment is adequate for the uses to which they are being put and are sufficient for
the conduct of the business of the Company and the Subsidiaries in the manner as conducted prior to
the Closing. The Company or a Subsidiary owns all of the Fixtures and Equipment free and clear of
all Liens except the Permitted Encumbrances.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.19 <U>Contracts</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Schedules 3.19 and 3.17 contains a true and complete list of each of the following
Contracts as of the date hereof:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all Contracts providing for a commitment of employment or consultation services for
a specified term and payments at any one time or in any one year in excess of $100,000;




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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all Contracts with any Person containing any provision or covenant prohibiting or
materially limiting the ability the Company or any of the Subsidiaries to engage in any
business activity or compete with any Person;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) all Contracts relating to indebtedness of the Company or any of the Subsidiaries;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all Contracts (other than this Agreement) providing for (i)&nbsp;the disposition or
acquisition of any assets or properties that individually or in the aggregate are material
to the business or any of the Subsidiaries or that contain continuing obligations of any of
the Subsidiaries, or (ii)&nbsp;any merger or other business combination involving the Company or
any of the Subsidiaries;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all Contracts (other than this Agreement) that limit or contain restrictions on the
ability of the Company or any of the Subsidiaries to incur indebtedness or incur or suffer
to exist any Lien, to purchase or sell any assets, to change the lines of business in which
it participates or engages or to engage in any merger or other business combination;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) all Contracts establishing any joint venture, strategic alliance or other
collaboration;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) all Contracts with any Person obligating the Company and any of the Subsidiaries
to guarantee or otherwise become directly or indirectly obligated with respect to any
liability or obligation in excess of $25,000 in each case or $100,000 in the aggregate at
any one time outstanding;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) all Contracts for the leasing of real property by the Company and any of the
Subsidiaries setting forth the address, landlord and tenant for each lease; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) all other Contracts that (i)&nbsp;involve the payment, pursuant to the terms of any
such Contract, by or to the Company or any of the Subsidiaries of more than $100,000
annually, (ii)&nbsp;cannot be terminated within 90&nbsp;days after giving notice of termination
without resulting in any material cost or penalty to the Company, or (iii)&nbsp;are material to
the businesses of the Company and the Subsidiaries;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, true, correct and complete copies of the Mizuho Credit Documents
and each Contract required to be disclosed in Schedule&nbsp;3.19 have been delivered to, or made
available for inspection by, Purchaser. Each such Contract is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the
Company or the applicable Subsidiary and, of each other party thereto; and neither the Company nor,
to the knowledge of Seller, any other party to such Contract, is in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract). All conditions necessary to maintain the Contracts
in force have been duly performed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.20 <U>Tax</U>.



<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries have duly and timely filed with the appropriate taxing
authorities all material federal, state and local income Tax Returns and all other material Tax
Returns required to be filed through the date hereof and will duly and timely file any such returns
required to be filed on or prior to the Closing. Such Tax Returns and other information filed are
(and, to the extent they will be filed prior to the Closing, will be) complete and accurate in all
material respects. Neither the Company nor either of the Subsidiaries has pending any request for
an extension of time within which to file federal, state or local income Tax Returns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All Taxes of the Company and the Subsidiaries in respect of periods (or portions thereof)
ending at or prior to the Closing have been paid by the Company and the Subsidiaries or such Taxes
(other than income Taxes) are shown as due and payable after the Closing on the Financial
Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;No federal, state, local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any material Taxes or material Tax Returns of the
Company or any of the Subsidiaries. Neither the Company nor any of the Subsidiaries has received a
written notice of any such pending audits or proceedings. There are no outstanding waivers
extending the statutory period of limitation relating to the payment of Taxes due from the Company
or any of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the IRS nor any other taxing authority (whether domestic or foreign) has asserted
in writing, or to the best knowledge of the Company and the Subsidiaries, is
threatening to assert, against the Company or any of the Subsidiaries any material deficiency
or material claim for Taxes in excess of the reserves established therefor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;There are no Liens for Taxes upon any property or assets of the Company or any of the
Subsidiaries, except for Liens for Taxes not yet due and payable and liens for Taxes that are being
contested in good faith by appropriate proceedings as set forth on Schedule&nbsp;3.20(e) and as to which
adequate reserves have been established in accordance with GAAP.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Company nor any of the Subsidiaries has any obligation under any Tax sharing
agreement or similar arrangement with any other Person with respect to Taxes of such other Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.21 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Company or Seller to Purchaser or any representative or Affiliate of Purchaser in
connection with this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.22 <U>Oil and Gas Properties</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company or a Subsidiary has Good and Defensible Title to all Oil and Gas Properties.



<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;To the Knowledge of Seller (i)&nbsp;all of the Wells of the Company and the Subsidiaries have
been drilled and completed within the boundaries of the Oil and Gas properties of the Company and
the Subsidiaries or within the limits otherwise permitted by Contract, and by applicable Laws; and
(ii)&nbsp;all drilling and completion of such Wells and all operations with respect thereto have been
conducted in compliance with all applicable Laws, except such violations that would not or could
not reasonably be expected to have a Material Adverse Effect on the Company and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Company and the Subsidiaries have all material Licenses necessary for, used or held
for use in the conduct of their businesses.


<P align="center" style="font-size: 10pt"><B>ARTICLE IV<BR>
REPRESENTATIONS AND WARRANTIES OF PURCHASER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchaser hereby represents and warrants to Seller as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Organization of Purchaser</U>. Purchaser is a limited partnership duly formed,
validly existing and in good standing under the Laws of the State of Delaware. Purchaser has full
organizational power and authority to execute and deliver this Agreement and to perform Purchaser&#146;s
obligations hereunder and to consummate the transactions contemplated hereby, including without
limitation to buy pursuant
to this Agreement the Membership Interest and issue to Seller in consideration therefore the
AREP Units.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Authority</U>. The execution and delivery by Purchaser of this Agreement, and the
performance by Purchaser of its obligations hereunder (including the issuance of the AREP Units),
have been duly and validly authorized and, no other partnership action on the part of Purchaser is
necessary. This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>No Conflicts</U>. The execution and delivery by Purchaser of this Agreement and the
issuance of the AREP Units as contemplated hereby do not, the performance by Purchaser of its
obligations under this Agreement and the consummation of the transactions contemplated hereby, will
not:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with, or result in a violation or breach of, any of the terms, conditions or
provisions of the organizational documents of Purchaser;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with, or result in a violation or breach of, any term or provision of any Law or
Order applicable to Purchaser or any of its Assets and Properties (other than such conflicts,
violations or breaches which will not have a Material Adverse Effect on Purchaser; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with, or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as a result or under
the terms of, (iv)&nbsp;result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or imposition of

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">any Lien upon Purchaser or any of its Assets and Properties under, any Contract or License to which
Purchaser is a party or by which any of its Assets and Properties is bound.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Capitalization</U>. The AREP Units have been duly authorized by all required action on
the part of the Purchaser; the AREP Units, when issued and paid for in accordance with the
Agreement, will be validly issued, fully paid and nonassessable, and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the Purchaser, except
as expressly set forth in the Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE V<BR><BR>
COVENANTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance of Business Prior to Closing</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Seller shall cause each of the Company and the Subsidiaries from the date hereof
through the Closing Date to:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) conduct its operations and business according to their usual, regular and ordinary
course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) use all commercially reasonable efforts to keep its business and properties
substantially intact, including its present operation, physical facilities, working



<P align="left" style="margin-left:3%; font-size: 10pt">conditions, insurance policies, and relationships with lessors, licensors, suppliers,
customers, employees;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) maintain its corporate existence;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) maintain its books and records and accounts in its usual, regular, and ordinary
manner in compliance with all applicable laws and governmental orders;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) pay and discharge when due all taxes, assessments and governmental charges imposed
upon it or any of its properties, or upon the income or project therefrom in the ordinary
course of business consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) promptly notify Purchaser of any Material Adverse Change to the Company or the
Subsidiaries; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) permit representatives of Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of the Company
and the Subsidiaries, to all premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to the Company and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the generality of the foregoing, from the date hereof through the
Closing, Seller shall not and shall cause each of the Company and its Subsidiaries not to:




<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) engage in any transaction, or take or omit to take any action, that would result in
a breach of any representation or warranty in Article&nbsp;II and III of this Agreement;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) declare, set aside, or pay any dividend;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) declare or pay any increase in compensation to any officer, director, employee or
agent of the Company or any of the Subsidiaries, except in the ordinary course consistent
with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) enter into any Contract that, had it been in effect on the date hereof, would have
been required to be listed on Schedule&nbsp;3.19, except for those Contracts entered into in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) permit, allow or suffer any of its properties, assets or rights to be subject to
any Lien other than Permitted Encumbrances;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) incur any long-term indebtedness except under the Mizuho Credit Agreement;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) make any material capital expenditure or commitment, other than for emergency
repairs or replacement, except for those capital expenditures or commitments made in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) terminate, materially modify, assign, or materially amend any Contract required
to be listed on Schedule&nbsp;3.19, except in the ordinary course consistent with past practice.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Efforts to Consummate Transaction</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Purchaser (with the co-operation of Seller) shall use commercially reasonable efforts to
obtain the written consent of the Required Lenders (as defined in the Mizuho Pledge Agreement) to
the sale of the Membership Interest. Purchaser shall enter into such agreements and deliver such
other documentation (in each case, in form and substance reasonably satisfactory to Purchaser and
Seller) to the Agents under the Mizuho Credit Documents in order to effect the transfer of the
Membership Interest subject to the Bank of Texas Lien and to cause Purchaser to replace Seller
under the Mizuho Pledge Agreement and all other documents to which Seller is a party under the
Mizuho Credit Documents.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;From the date hereof through the Closing Date, upon the terms and subject to the
conditions set forth in this Agreement, each of the parties shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. The parties will use their
commercially reasonable efforts and cooperate with one another (i)&nbsp;in promptly determining whether
any filings are required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would result in a Company
Material Adverse Effect on the Company or the Subsidiaries or an event of


<P align="center" style="font-size: 10pt">16
</DIV>

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<P align="left" style="font-size: 10pt">default, termination or
acceleration of any agreement or any put right under any agreement) under any applicable Law or
regulation or from any Governmental or Regulatory Authority or third parties, and (ii)&nbsp;in promptly
making any such filings, in furnishing information required in connection therewith and in timely
seeking to obtain any such consents, approvals, permits or authorizations. For purposes of this
Section&nbsp;5.2, Seller shall not be obligated to make any payment to any third party as a condition to
obtaining such party&#146;s consent or approval, other than for required filing fees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;As promptly as practicable following the date hereof: (i)&nbsp;Purchaser shall take all action
necessary to call, give notice of and hold a meeting (the &#147;Meeting&#148;) of the holders of AREP Units
to vote on the matters described in Section&nbsp;8.6 hereof (the &#147;Proposals&#148;); and (ii)&nbsp;Purchaser shall
prepare and file with the SEC a proxy or information statement (the &#147;Statement&#148;) of Purchaser to be
sent to the holders of AREP Units in connection with the Meeting. Purchaser shall use commercially
reasonable efforts to cause the Statement to comply with the rules and regulations promulgated by
the SEC and to respond promptly to any comments of the SEC or its staff. Each of such Proposals,
and all Statements and other documents relating thereto, shall be in form and substance reasonably
acceptable to Purchaser, Seller, Barberry Corp. and High Coast Limited Partnership. Each of
Barberry Corp. and High Coast Limited Partnership hereby agrees to vote all of its AREP Units in
favor of the Proposals at the Meeting. Notwithstanding the
foregoing, to the extent practicable, the parties shall take all necessary and appropriate
action to cause the Proposals to be approved without a meeting of the holders of AREP Units in
accordance with applicable law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;From the date hereof through the Closing Date, Seller shall give prompt written notice to
Purchaser of: (i)&nbsp;any occurrence, or failure to occur, of any event which occurrence or the
failure would reasonably be expected to cause any representation or warranty of any of the Seller
contained in this Agreement, if made on or as of the date of such event or as of the Closing Date,
to be untrue or inaccurate, except for changes permitted by this Agreement and except to the extent
that any representation and warranty is made as of a specified date,
in which case, such representation and warranty shall be true, complete and accurate as of such date; or (ii)&nbsp;any
failure of the Seller, the Company, the Subsidiaries or any officer, general partner, director,
employee, consultant or agent of the Seller, the Company or the Subsidiaries, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by it or them under
this Agreement; provided, however, that no such notification shall affect the representations or
warranties of the Seller or the conditions to the obligations of Purchaser hereunder.


<P align="center" style="font-size: 10pt"><B>ARTICLE VI<BR>
ASSIGNMENT AND ASSUMPTION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Assignment and Assumption</U>. At the Closing, Seller, the Company, Purchaser, AREH , AREP
Oil and Gas and 6.2 AREP/NEG MGP LLC shall enter into the Assignment Agreement pursuant to which
Seller will transfer, assign, convey and grant through Purchaser, AREH, and AREP Oil and Gas to
AREP/NEG MGP LLC, its successors and assigns forever 100% of Seller&#146;s rights, title and interest to
the Membership Interest.


<P align="center" style="font-size: 10pt">17
</DIV>

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<P align="center" style="font-size: 10pt"><B>ARTICLE VII<BR>
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Purchaser under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of Seller contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be accurate, true and correct in
all material respects on and as of the Closing Date with the same force and effect as though made
by Seller on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2
<U>Compliance by Seller</U>. Seller shall have duly performed and complied with all of its covenants, obligations and
agreements contained in this Agreement to be performed and complied with by Seller on or prior to
the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Seller&#146;s Certificates</U>. Purchaser shall have received a certificate dated as of
the Closing Date executed by an authorized officer of Seller certifying as to the fulfillment and
satisfaction of the conditions set forth in Sections&nbsp;7.1 and 7.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>No Material Adverse Change</U>. No Material Adverse Change to the Company or any of
the Subsidiaries shall have occurred and no event shall have occurred which, in the reasonable
judgment of Purchaser, is reasonably likely to have a Material Adverse Effect on the Company or any
of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the Company or
any of the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin,
restrain or prohibit, or is reasonably likely to result in substantial damages in respect of, any provision of the Agreement or
the consummation of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Reserve Reports</U>. Purchaser shall have received the 2004 Reserve Reports.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Registration Rights Agreement</U>. Purchaser shall have executed and delivered the
Registration Rights Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE VIII<BR>
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Seller under Article&nbsp;I of this Agreement are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of Purchaser contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be accurate, true and correct in
all


<P align="center" style="font-size: 10pt">18
</DIV>


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<P align="left" style="font-size: 10pt">material respects on and as of the Closing Date with the same force and effect as though made
by Purchaser on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Compliance by Purchaser</U>. Purchaser shall have duly performed and complied with
its respective covenants, obligations and agreements contained in this Agreement to be performed
and complied with by Purchaser on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Purchaser&#146;s Certificate</U>. Seller shall have received a certificate dated as of the
Closing Date executed by an authorized officer of Purchaser certifying as to the fulfillment and
satisfying the conditions set forth in Sections&nbsp;8.1 and 8.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Consent of Required Lenders</U>. The written consent of the Required Lenders (as
defined in the Mizuho Pledge Agreement) shall have been obtained with respect to the sale of the
Membership Interest and Purchaser shall have entered into the document contemplated in Section
5.2(a) or Purchaser shall have either (i)&nbsp;refinanced the loans under the Mizuho Credit Documents
with loans that do not require such consent or (ii)&nbsp;consummated the Alternative Transaction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the Company or
any of the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is
reasonably likely to result in substantial damages in respect of, any provision of the Agreement or
the consummation of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>Approval</U>. The transactions contemplated by this Agreement shall have been
approved through all depositary unit holder action required by the New York Stock Exchange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <U>Registration Rights Agreement</U>. Seller shall have executed and delivered the
Registration Rights Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 <U>Amendment to Limited Partnership Agreement</U>. The Purchaser&#146;s amended and restated
agreement of limited partnership, dated as of May&nbsp;12, 1987, as amended, shall have been
 amended (i)
as necessary to consummate this transaction, (including without limitation, modification of Section
4.5(c) thereof to render such section inapplicable to any transactions approved by the audit
committee of the Purchaser), and (ii)&nbsp;such that the general partner and the limited partners, as
defined therein, may not cause Purchaser, or any successor entity of Purchaser, whether in its
current form as a limited partnership or as converted to or succeeded by a corporation or other
form of business association, to effect a merger or other business combination of Purchaser or such
successor, in each case pursuant to Section&nbsp;253 of the General Corporation Law of Delaware, or any
successor statute, or any similar short-form merger statute under the laws of Delaware or any other
jurisdiction.

<P align="center" style="font-size: 10pt">19

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<P align="center" style="font-size: 10pt"><B>ARTICLE IX</B>



<P align="center" style="font-size: 10pt"><B>TERMINATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Termination</U>. This Agreement may be terminated at any time on or prior to the
Closing Date:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;By written notice of Seller or Purchaser, if the Closing shall not have taken place on or
before September&nbsp;30, 2005; provided, however, that the right to terminate this Agreement under this
Section&nbsp;9.1 shall not be available to any party whose willful failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or
before such date;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Upon the giving of the Section&nbsp;1.4 Notice;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;By Purchaser, if there shall have been a material breach of any covenant, representation
or warranty or other agreement of Seller hereunder, and such breach shall not have been remedied
within ten Business Days after receipt by Seller of a notice in writing from Purchaser specifying
the breach and requesting such be remedied; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;By Seller, if there shall have been a material breach of any covenant, representation or
warranty or other agreement of Purchaser hereunder, and such breach shall not have been remedied
within ten Business Days after receipt by Purchaser of notice in writing from Seller specifying the
breach and requesting such be remedied.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Effect of Termination</U>. If this Agreement is terminated pursuant to Section&nbsp;9.1,
all obligations of the parties hereunder shall terminate, except for the obligations set forth in
Article&nbsp;X and Article&nbsp;XII, which shall survive the termination of this Agreement, and except that
no such termination shall relieve any party from liability for any prior willful breach of this
Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE X</B>



<DIV align="center" style="font-size: 10pt"><B>INDEMNIFICATION</B></DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 <U>Indemnification by Seller</U>. Seller agrees to indemnify Purchaser, its Affiliates
and their respective officers, directors, employees, independent contractors, stockholders,
principals, partners, agents, or representatives (each an &#147;Indemnified Person&#148; and collectively,
the &#147;Indemnified Persons&#148;) against, and to hold each
Indemnified Person harmless from, any and all Losses incurred or suffered by any Indemnified Person relating to or arising out of or in
connection with (a)&nbsp;any breach of or any inaccuracy in any representation or warranty made by
Seller in this Agreement, or (b)&nbsp;any breach of or failure by any Seller to perform any of its
covenants or obligations set out or contemplated in this Agreement. Notwithstanding any provisions
to the contrary contained herein, the aggregate liability of Seller and Barberry Corp. for any and
all obligations under this Agreement shall in no event exceed the Purchase Price.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 <U>Claims</U>. As promptly as is reasonably practicable after becoming aware of a claim
for indemnification under this Agreement, the Indemnified Person shall promptly give notice to


<P align="center" style="font-size: 10pt">20
</div>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">the
Seller (&#147;Indemnifying Person&#148;) of such claim and the amount the Indemnified Person will be entitled
to receive hereunder from the Indemnifying Person; provided that the failure of the Indemnified
Person to promptly give notice shall not relieve the Indemnifying Person of its
obligations except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. If the Indemnifying Person does not object in writing to such indemnification
claim within 30&nbsp;days of receiving notice thereof, the Indemnified Person shall be entitled to
recover, on the thirty-fifth day after such notice was given, from the Indemnifying Person the
amount of such claim, and no later objection by the Indemnifying Person shall be permitted; if the
Indemnifying Person agrees that it has an indemnification obligation but objects that it is
obligated to pay only a lesser amount, the Indemnified Person shall nevertheless be entitled to
recover, on the thirty-fifth day after such notice was given, from the Indemnifying Person the
lesser amount, without prejudice to the Indemnified Person&#146;s claim for the difference. In addition
to the amounts recoverable by the Indemnified Person from the Indemnifying Person pursuant to the
foregoing provisions, the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the rate of Two Times Prime from, and including,
the thirty-fifth day after such notice of an indemnification claim is given to, but not including,
the date such recovery is actually made by the Indemnified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 <U>Notice of Third Party Claims; Assumption of Defense</U>. The Indemnified Person
shall give notice as promptly as is reasonably practicable to the Indemnifying Person of the
assertion of any claim, or the commencement of any suit, action or proceeding, by any Person not a
party hereto (a &#147;Third Party Claim&#148;) in respect of which indemnity may be sought under this
Agreement; provided that the failure of the Indemnified Person to promptly give notice shall not
relieve the Indemnifying Person of its obligations except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person may, at its own
expense, participate in the defense of any Third Party Claim, suit, action or proceeding (a)&nbsp;upon
notice to the Indemnified Person and (b)&nbsp;upon delivery by the Indemnifying Person to the
Indemnified Person a written agreement that the Indemnified Person is entitled to indemnification
for all Losses arising out of such Third Party Claim, suit, action or proceeding and that the
Indemnifying Person shall be liable for the entire amount of any Loss, at any time during the
course of any such Third Party Claim, suit, action or proceeding, assume the defense thereof;
provided, however, that (i)&nbsp;the Indemnifying Person&#146;s counsel is reasonably satisfactory to the
Indemnified Person, and (ii)&nbsp;the Indemnifying Person shall thereafter consult with the Indemnified
Person upon the Indemnified Person&#146;s reasonable request for such consultation from time to time
with respect to such Third Party Claim, suit, action or proceeding. If the Indemnifying Person
assumes such defense, the Indemnified Person shall have the right (but not the duty) to participate
in the defense thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Person. If, however, the Indemnified Person reasonably determines in
its judgment that representation by the Indemnifying Person&#146;s counsel of both the Indemnifying
Person and the Indemnified Person would present such counsel with a conflict of interest, then such
Indemnified Person may employ separate counsel to represent or defend it in any such Third Party
Claim, action, suit or proceeding and the Indemnifying Person shall pay all of the fees and
disbursements in connection with the retention of such separate counsel. If the Indemnifying
Person fails to promptly notify the Indemnified Party that the Indemnifying Party desires to defend
the Third Party Claim pursuant, or if the Indemnifying Person gives such notice but fails to
prosecute vigorously and diligently or settle the Third Party Claim, then the Indemnified Party
will have the right to defend, at the sole cost and expense of the Indemnifying Person, the Third
Party Claim by all appropriate proceedings, which



<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">proceedings will be prosecuted by the
Indemnifying Person in good faith or will be settled at the discretion of the Indemnifying Person
(with the consent of the Indemnifying Person, which consent will not be unreasonably withheld).
The Indemnifying Person will have full control of such defense and proceedings, including any
compromise or settlement thereof. Whether or not the Indemnifying Person chooses to defend or
prosecute any such Third Party Claim, suit, action or proceeding, all of the parties hereto shall
cooperate in the defense or prosecution thereof.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 <U>Settlement or Compromise</U>. Any settlement or compromise made or caused to be made
by the Indemnified Person or the Indemnifying Person, of any claim, suit, action or proceeding
shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be,
in the same manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise thereof; provided, however, that no
obligation, restriction or Loss shall be imposed on the Indemnified Person as a result of such
settlement without its prior written consent. The Indemnified Person will give the Indemnifying
Person at least 30&nbsp;days&#146; notice of any proposed settlement or compromise of any Third Party Claim,
suit, action or proceeding it is defending, during which time the Indemnifying Person may reject
such proposed settlement or compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and complete liability and
responsibility for such Third Party Claim, suit, action or proceeding and any and all Losses in
connection therewith in excess of the amount of unindemnifiable Losses which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5 <U>Failure of Indemnifying Person to Act</U>. In the event that the Indemnifying Person
does not assume the defense of any Third Party Claim, suit, action or proceeding brought against an
Indemnified Person, then any failure of the Indemnified Person to defend or to participate in the
defense of any such Third Party Claim, suit, action or proceeding or to cause the same to be done,
shall not relieve the Indemnifying Person of any of its obligations under this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.6 <U>Tax Character</U>. Seller and Purchaser agree that any payments pursuant to this
Article&nbsp;X will be treated for federal and state income tax purposes as adjustments to the purchase
price of the Membership Interest, and that they will report such payments on all Tax Returns
consistently with such characterization.


<P align="center" style="font-size: 10pt"><B>ARTICLE XI</B>



<DIV align="center" style="font-size: 10pt"><B>DEFINITIONS</B></DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 <U>Defined Terms</U>. As used in this Agreement, the following defined terms have the
meanings indicated below:

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;2004 Reserve Reports&#148; means the reserve reports prepared by an independent petroleum reserve
engineering firm acceptable to both Purchaser and Seller which provides estimates of the net
recoverable crude oil and natural gas reserves of the Company and the Subsidiaries, for each
of the Reserve Categories, as of January&nbsp;21, 2005. The proved undeveloped, probable, and
possible reserve estimates shall be further subdivided into (i)&nbsp;reserves attributable to the
properties of the Company in Pecos County, Texas known as Longfellow Ranch Field, and (ii)&nbsp;all
other such reserves. The 2004 Reserve Reports shall be prepared consistent with industry

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">standards, using methodologies consistent with reserve reports prepared for the Company and its
Subsidiaries by independent petroleum reserve engineering firms for years prior to 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Low Reserve Valuation Amount&#148; means the sum of A and B, where A equals the quotient,
the dividend of which is the Low Reserve Valuation Amount minus $497,477,000, and the divisor of
which is 2, and B equals $278,241,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted High Reserve Valuation Amount&#148; means the sum of A and B, where A equals a quotient,
the dividend of which is the High Reserve Valuation Amount minus $489,877,000, and the divisor of
which is 2, and B equals $278,241,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Purchase Amount&#148; means the sum of A and B, where A equals the product of (a)&nbsp;the
difference between the Adjusted High Reserve Valuation Amount and Adjusted Low Reserve Valuation
Amount, and (b)&nbsp;70.3%, and B equals the Adjusted Low Reserve Valuation Amount.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Affiliate&#148; means, with respect to any specified Person, any other Person that, directly or
indirectly, owns or controls, is under common ownership or control with, or is owned or controlled
by, such specified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Agreement&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Alternative
Sellers&#148; has the meaning ascribed to it in
Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Alternative
Transaction&#148; has the meaning ascribed to it in
Section&nbsp;1.4(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREH&#148; means American Real Estate Holdings Limited Partnership, a Delaware limited
partnership.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP Oil and Gas&#148; means AREP Oil &#038; Gas LLC, a Delaware limited liability company.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP
Units&#148; has the meaning ascribed to it in Section&nbsp;1.2(c).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP/NEG MGP LLC&#148; means AREP/NEG MGP LLC, a Delaware limited liability company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Assets and Properties&#148; of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or intangible, and
wherever situated), including the goodwill related thereto, operated, owned or leased by such
Person.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Assignment
Agreement&#148; has the meaning ascribed to it in Section&nbsp;1.4(a).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Astral&#148;
has the meaning ascribed to it in Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Audited Financial Statements&#148; means the audited financial statements of the Company as of
December&nbsp;31, 2003 and December&nbsp;31, 2004, consisting of the balance sheet at such date and the
related statements of operations, statement of members&#146; equity, and cash flows for the


<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">year then
ended, each accompanied by the audit report of KPMG LLP, independent public auditors with respect
to the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Bank of Texas Lien&#148; means that lien existing in connection with the pledge of the Membership
Interest to Bank of Texas, N.A. pursuant to the Mizuho Pledge Agreement.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business Day&#148; means any day of the year other than (i)&nbsp;any Saturday or Sunday or (ii)&nbsp;any
other day on which commercial banks located in New York City are generally closed for business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business or Condition&#148; of any Person means the business, condition (financial or otherwise),
properties, assets or results of operations or prospects of such Person, taken as a whole.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLA&#148; means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any successor statutes and any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLIS&#148; means the Comprehensive Environmental Response, Compensation and Liability
Information System List.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Cigas&#148;
has the meaning ascribed to it in Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing&#148; has the meaning ascribed to it in Section&nbsp;1.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Date&#148; has the meaning ascribed to it in Section&nbsp;1.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Reserve Value Ranges&#148; means a calculation of the ranges of present values of the net
estimated cash flows for each of the Reserve Categories of the Company and the Subsidiaries, as set
forth in the 2004 Reserve Reports, utilizing the ranges of discount rates set forth below, and
based on all of assumptions contained in the 2004 Reserve Reports (except that initial cash prices
per barrel of oil and per mcf of natural gas shall be as described in Annex A and adjusted on a
well-by-well basis consistent with the methodologies applied in the 2004 Reserve Reports for items
such as transportation, basis differentials, marketing, the quality of the crude oil and the
heating value of the natural gas).

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Reserve Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Discount Rates</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Non-Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Undeveloped</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Longfellow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Probable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Longfellow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Possible</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Longfellow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing
Statement&#148; has the meaning ascribed to it in Section&nbsp;1.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing
Statement Date&#148; has the meaning ascribed to it in
Section&nbsp;1.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contract&#148; means any contract, lease, commitment, understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan, permit or license,
whether written or oral, which is intended or purports to be binding and enforceable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Dollars&#148; or numbers proceeded by the symbol &#147;$&#148; means amounts in United States Dollars.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Claim&#148; means any third party (including, without limitations, governmental
agencies and employees) action, lawsuit, claim or proceeding (including claims or proceedings under
OSHA or similar laws relating to safety of employees) that seeks to impose liability for (a)
pollution or contamination of the ambient air, surface water, ground water or land; (b)&nbsp;solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation; (c)
exposure to hazardous or toxic substances; (d)&nbsp;the safety or health of employees; or (e)&nbsp;the
transportation, processing, distribution in commerce, use or storage of hydrocarbons or chemical
substances. An Environmental Claim includes, but is not limited to, a common law action, as well
as a proceeding to issue, modify or terminate an Environmental Permit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Law&#148; means any law, rule, regulation or order of other requirements of law
(including common law) any federal, foreign, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority with jurisdiction over the Company or any
of the Subsidiaries or any of their respective properties or assets that relates to (a)&nbsp;pollution
or protection of human health, natural resources and the environment, including ambient air,
surface water, ground water or land; (b)&nbsp;solid, gaseous or liquid waste generation, treatment,
storage, disposal or transportation; (c)&nbsp;exposure to Hazardous Materials; (d)&nbsp;the safety or health
of employees; or (e)&nbsp;regulation of the manufacture, processing, distribution in commerce, use or
storage of Hazardous Materials, including hydrocarbons or chemical substances. Environmental Laws
include but are not limited to OSHA, CERCLA, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Safe
Drinking Water Act, as amended, the Superfund Amendments and Reauthorization Act of 1986 (&#147;SARA&#148;),
as amended, the Resource Conservation and Recovery Act of 1976 (&#147;RCRA&#148;), as amended, the Hazardous
and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended,
the Oil Pollution Act of 1990 (&#147;OPA&#148;), as amended, the Hazardous Materials Transportation Act, as
amended, and any other federal, foreign, state and local law whose purpose is to conserve or
protect human health, the environment, wildlife or natural resources.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Permit&#148; means any permit, license, approval or other authorization under any
Environmental Law, applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other subdivision thereof relating to pollution or
protection of health or the environment, including laws, regulations or other requirements

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">relating
to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous
substances or toxic materials or wastes into ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical subsidiaries, pollutants, contaminants or
hazardous or toxic materials or wastes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ERISA&#148; means the Employee Retirement Income Security Act of 1974, as amended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Financial Statements&#148; means the Audited Financial Statements and the Interim 2004 Financial
Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Fixtures and Equipment&#148; has the meaning ascribed to it in Section&nbsp;3.18.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GAAP&#148; means U.S. generally accepted accounting principles at the time in effect.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Good and Defensible Title&#148; means such right title and interest that is (a)&nbsp;evidenced by an
instrument or instruments filed of record in accordance with the conveyance and recording laws of
the applicable jurisdiction to the extent necessary to prevail against competing claims of bona
fide purchasers for value without notice, and (b)&nbsp;subject to Permitted Encumbrances, free and clear
of all Liens, claims, infringements, burdens and other defects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Governmental or Regulatory Authority&#148; means any court, tribunal, arbitrator, authority,
administrative or other agency, commission, authority, licensing board official or other
instrumentality of the United States or any state, county, city or other political subdivision.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GP
Interest&#148; has the meaning ascribed to it in
Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GP
Interests&#148; has the meaning ascribed to it in
Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Hazardous Material&#148; means (a)&nbsp;any &#147;hazardous substance,&#148; as defined by CERCLA; (b)&nbsp;any
&#147;hazardous waste&#148; or &#147;solid waste,&#148; in either case as defined by the Resource Conservation and
Recovery Act, as amended; (c)&nbsp;any hazardous, dangerous or toxic chemical, material, waste or
substance, regulated by any Environmental Law; (d)&nbsp;any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof; (e)&nbsp;any asbestos-containing
materials in any form or condition; (f)&nbsp;any polychlorinated biphenyls in any form or condition; (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof; (h)&nbsp;any air pollutant
which is so designated by the U.S. Environmental Protection Agency as authorized by the Clean Air
Act; or (i)&nbsp;any mold or microbial/microbiological contaminants that pose a risk to human health or
the environment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;High Reserve Valuation Amount&#148; means the sum of the high range of the Closing Reserve Value
Ranges (based on the low discount rates) for each of Reserve Categories.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance&#148; has the meaning ascribed to it in Section&nbsp;1.2(b)(i).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance Value&#148; has the meaning ascribed to it in Section&nbsp;1.2(b)(ii).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnified Person&#148; has the meaning ascribed to it in Section&nbsp;10.1.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnifying Person&#148; has the meaning ascribed to it in Section&nbsp;10.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Interim 2004 Financial Statements&#148; means the unaudited internal financial statements of the
Company for the nine months ended September&nbsp;30, 2004, consisting of the balance sheet at such date
and the related statements of operations for the period then ended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Knowledge&#148; means, with respect to the Seller, the Company and/or the Subsidiaries, in each
case the knowledge of any director, officer, senior executive, partner or member of Seller, Company
or any Subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Laws&#148; means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of the United States or any state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lease&#148; means each of the oil and gas or mineral leases set forth on Schedule&nbsp;3.22(a).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;License&#148; means licenses, permits, certificates of authority, authorizations, approvals,
registrations, findings of suitability, variances, exemptions, certificates of occupancy, orders,
franchises and similar consents granted or issued by any Governmental or Regulatory Authority.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lien&#148; means any mortgage, lien (except for any lien for Taxes not yet due and payable),
charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any
third party, easement, encroachment, encumbrance or other adverse claim of any kind or description.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Loss&#148; or &#147;Losses&#148; means any and all liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including attorneys&#146; fees and expenses and costs of
investigation and litigation).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Low Reserve Valuation Amount&#148; means the sum of the low range of the Closing Reserve Value
Ranges (based on the high discount rates) for each of Reserve Categories.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Managing
GP Interest&#148; has the meaning ascribed to it in
Section&nbsp;1.4(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Material Adverse Effect&#148; or &#147;Material Adverse Change,&#148; as to any Person, means a material
adverse change (or circumstance involving a prospective change) in the Business or Condition of
such Person, other than changes resulting from changes or fluctuations in the market price of oil,
gas or natural gas.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Meeting&#148;
has the meaning ascribed to it in
Section&nbsp;5.2(c).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Membership Interest&#148; has the meaning ascribed to it in the Recitals of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Mizuho Credit Agreement&#148; means that certain Credit Agreement, dated as of December&nbsp;29, 2003,
among NEG Operating LLC, certain lenders party thereto, Mizuho Corporate Bank, Ltd., as
Administrative Agent, Bank of Texas, N.A. and The Bank of Nova Scotia, as Co-Agents, Bank of Texas,
N.A., as Collateral Agent and Mizuho Corporate Bank, Ltd., as Sole Arranger and Bookrunner.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Mizuho Credit Documents&#148; means the Mizuho Credit Agreement, the Seller Pledge Agreement, the
NEG Operating Pledge Agreement, the NEGI Pledge Agreement, the Security

<P align="center" style="font-size: 10pt">27
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">Agreement and all
documents entered into or delivered in connection therewith and all amendments and modifications
thereto<B>.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;NEGI&#148; means National Energy Group, Inc.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;NEGI Pledge Agreement&#148; means that certain Pledge Agreement and Irrevocable Proxy, dated as of
December&nbsp;29, 2003, by National Energy Group, Inc. in favor of Bank of Texas, N.A., as Collateral
Agent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;National Priorities List&#148; means the list of priority contaminated sites maintained by the
United States Environmental Protection Agency as contemplated by Section&nbsp;105 of CERCLA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;NEG Operating Pledge Agreement&#148; means that certain Pledge Agreement and Irrevocable Proxy,
dated as of December&nbsp;29, 2003, by NEG Operating LLC in favor of Bank of Texas, N.A., as Collateral
Agent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Oil and Gas Properties&#148; means all of the rights, titles and interests in and to oil and gas
or mineral properties of the Company and the Subsidiaries including all oil and gas or mineral
leases and other mineral interests of the Company and the Subsidiaries and all of the surface
leases, rights-of-way, easements, licenses, permits, servitudes and other rights-of-use (whether
surface, subsurface or subsea) of the Company and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Operating Agreement&#148; has the meaning set forth in the Recitals.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Order&#148; means any writ, judgment, decree, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;OSHA&#148; means the Occupational Safety and Health Act, as amended, or any successor statute, and
any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Panaco Agreement&#148; means the Agreement and Plan of Merger dated as of January&nbsp;21, 2005, by and
among National Offshore LP, Highcrest Investors Corp., Arnos Corp, Purchaser and Panaco Inc..


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Permitted Encumbrances&#148; means, as applicable,


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;any liens for taxes and assessments not yet delinquent as of the Closing Date;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any liens or security interests created by law or reserved in oil and gas leases
attributable to any assets or property for royalty, bonus or rental, or created to secure
compliance with the terms of any assets or property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any obligations or duties affecting any assets or property to any municipality or public
authority with respect to any franchise, grant, license or permit, and all applicable laws, rules
and orders of governmental authority;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;any (i)&nbsp;easements, rights-of-way, servitudes, permits, surface leases and other rights in
respect of surface operations, pipelines, grazing, hunting, fishing, lodging, canals, ditches,
reservoirs or the like, and (ii)&nbsp;easements for streets, alleys, highways, pipelines,

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">telephone
lines, power lines, railways and other similar rights-of-way attributable to any assets or
property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;all lessors&#146; royalties, overriding royalties, net profits interests, carried interests,
production payments, reversionary interests and other burdens on or deductions from the proceeds of
production attributable to any assets or property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;all rights attributable to any assets or property with respect to consent by, required
notices to, filings with, or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein to the extent same are customarily obtained
following such sale or conveyance;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;encumbrances securing payments to mechanics and material men and encumbrances attributable
to any assets or property securing payment of taxes or assessments that are, in either case, not
yet delinquent or, if delinquent, are being contested in good faith in the normal course of
business;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;all rights attributable to any assets or property with respect to production sales
contracts; division orders; contracts for sale, purchase, exchange, refining, or processing of
hydrocarbons; unitization and pooling designations, declarations, orders and agreements; operating
agreements; agreements of development; gas balancing or deferred production agreements; processing
agreements; plant agreements; pipeline, gathering and transportation agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements; and any and all other
agreements which are ordinary and customary in the oil, gas and other mineral exploration,
development or extraction business, to the extent such declarations, order and agreements described
in the Schedules attached hereto; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;all encumbrances, restrictions, exceptions, limitations and liens contemplated, created
and described in that certain Credit Agreement among NEG Operating LLC; Mizuho Corporate Bank, LTD;
Bank of Texas, N.A.; the Bank of Nova Scotia; et al dated December&nbsp;29, 2003 as amended;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Person&#148; means any natural person, corporation, limited liability company, general
partnership, limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Plans&#148; means all material pension and profit sharing, retirement and post retirement welfare
benefit, health insurance benefit (medical, dental and vision), disability, life and accident
insurance, sickness benefit, vacation, employee loan and banking privileges, bonus, incentive,
deferred compensation, workers compensation, stock purchase, stock option, phantom stock and other
equity-based, severance, employment, change of control or fringe benefit plans, programs,
arrangements or agreements, whether written or oral, including any employee benefit plans defined
in Section&nbsp;3(3) of ERISA., maintained or contributed to by the Company or any of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proposals&#148;
has the meaning ascribed to it in Section 5.2(c).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proposed Consent&#148; means the consent of the Required Lenders under the Mizuho Credit Agreement
to the transfer of the Membership Interest as contemplated by this Agreement.


<P align="center" style="font-size: 10pt">29


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Purchase Price&#148; has the meaning ascribed to it in Section&nbsp;1.2(c).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Purchaser&#148; has the meaning ascribed to it in the recitals of this Agreement.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Real
Property&#148; has the meaning ascribed to it in Section 3.17.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Reserve Categories&#148; means (i)&nbsp;proved developed producing, (ii)&nbsp;proved developed
non-producing, (iii)&nbsp;proved undeveloped, (iv)&nbsp;probable, and (v)&nbsp;possible.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Registration Rights Agreement&#148; means the Registration Rights Agreement between Purchaser,
Seller, and the other parties thereto, in substantially the form attached hereto as Exhibit&nbsp;B.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SEC&#148;
has the meaning ascribed to it in Section 3.14.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Section
1.4 Notice&#148; has the meaning ascribed to it in Section 1.4(c).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Security Agreement&#148; means that certain Security Agreement, dated as of December&nbsp;29, 2003, by
NEG Operating LLC in favor of Bank of Texas, N.A., as Collateral Agent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Seller&#148; has the meaning ascribed to it in the recitals of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Seller Pledge Agreement&#148; means that certain Pledge Agreement and Irrevocable Proxy, dated as
of December&nbsp;29, 2003, by Seller in favor of Bank of Texas, N.A., as Collateral Agent.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Shana&#148;
has the meaning ascribed to it in Section 3.3.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Statement&#148;
has the meaning ascribed to it in Section 5.2(c).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Subsidiary&#148; means NEG Operating LLC, Shana National LLC, a Delaware limited liability
company, NGX Energy Limited Partnership, a Delaware limited partnership, NGX GP of Delaware LLC, a
Delaware limited liability company, and NGX LP of Delaware LLC, a Delaware limited liability
company.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Substitute
Agreement&#148; has the meaning ascribed to it in Section 1.4(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax Return&#148; means any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect
to Taxes, including attachments thereto and amendments thereof, and including, without limitation,
information returns, any documents with respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Taxes&#148; means any and all taxes, charges, fees, levies, duties, liabilities, impositions or
other assessments, including, without limitation, income, gross receipts, profits, excise, real or
personal property, environmental, recapture, sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service, license, net worth, payroll, franchise,
gains, stamp, transfer and recording taxes, fees and charges, imposed by the Internal Revenue
Service (&#147;IRS&#148;) or any other taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision

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<P align="left" style="font-size: 10pt">or taxing agency
thereof (including a United States possession)), whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect
to, any such taxes, charges, fees, levies, duties, liabilities, impositions or other assessments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Third Party Claim&#148; has the meaning ascribed to it in Section&nbsp;10.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;TransTexas Agreement&#148; means that certain Agreement and Plan of Merger dated as of January&nbsp;21,
2005, by and among National Onshore LP, Highcrest Investors Corp. and TransTexas Gas Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Two Times Prime&#148; means two times the prime rate published by Citibank, N.A.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Well&#148; or &#147;Wells&#148; means all of the oil, gas and condensate wells, (whether producing, not
producing or abandoned or temporarily abandoned) in which the Company holds an interest.


<P align="center" style="font-size: 10pt"><B>ARTICLE XII</B>



<DIV align="center" style="font-size: 10pt"><B>MISCELLANEOUS</B></DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 <U>Investigation</U>. It shall be no defense to an action for breach of this Agreement
that Purchaser or its agents have (or have not) made investigations into the affairs of the Company
or that the Company or Seller could not have known of the misrepresentation or breach of warranty.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 <U>Survival of Representations and Warranties</U>. The representations and warranties
of the parties hereunder shall survive the Closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 <U>Entire Agreement</U>. This Agreement, including the schedules and exhibits hereto,
which are incorporated herein and made an integrated part hereof, constitutes the entire agreement
between the parties hereto and supersedes any and all prior discussions and agreements between the
parties relating to the subject matter hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 <U>Waiver</U>. Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written
instrument duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise
afforded, will be cumulative and not alternative.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5 <U>Amendment</U>. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6 <U>No Third Party Beneficiary</U>. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third party beneficiary rights upon
any

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<P align="left" style="font-size: 10pt">other Person, except that each Indemnified Persons shall be a third party beneficiary of
Article&nbsp;X.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7 <U>Assignment; Binding Effect</U>. No party may assign this Agreement or any right,
interest or obligation hereunder without the prior written consent of the other Parties. This
Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8 <U>Headings</U>. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9 <U>Invalid Provisions</U>. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or obligations of any
party hereto under this Agreement will not be materially and adversely affected thereby, (a)&nbsp;such
provision will be fully severable, (b)&nbsp;this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof, and (c)&nbsp;the
remaining provisions of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance here from.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.10 <U>Governing Law</U>. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the conflicts of laws principles
thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.11 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one and the
same instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.12 <U>Waiver of Jury Trial</U>. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY OF THEM AGAINST ANY OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. No party to this Agreement shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation procedure based upon,
or arising out of, this Agreement or any related instruments or the relationship between the
parties. No party will seek to consolidate any such action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived. THE PROVISIONS OF
THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT
TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.13 <U>Consent to Jurisdiction</U>. Each party irrevocably submits to the exclusive
jurisdiction of any NY State Court in the County of New York or any courts of the United States of
America located in the Southern District of New York, and each party hereby agrees that all suits,
actions and proceedings brought by such party hereunder shall be brought in any such
 court. Each
party irrevocably waives, to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding

<P align="center" style="font-size: 10pt">32
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">brought in any
such court, any claim that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum and the right to object, with respect to any such suit, action or
proceeding brought in any such court, that such court does not have jurisdiction over such party or
the other party. In any such suit, action or proceeding, each party waives, to the fullest extent
it may effectively do so, personal service of any summons, complaint or other process and agrees
that the service thereof may be made by any means permitted by Section&nbsp;0 (other than facsimile
transmission). Each party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.14 <U>Expenses</U>. All expenses, costs and fees in connection with the transactions
contemplated hereby (including fees and disbursements of counsel, consultants and accountants)
incurred by (a)&nbsp;Seller shall be paid and borne exclusively by Seller, and (b)&nbsp;Purchaser shall be
paid and borne exclusively by Purchaser. Notwithstanding the foregoing, if this Agreement is
terminated prior to the Closing and such termination results from any breach by Seller or
Purchaser, as the case may be, of any representation, warranty or covenant by such party, then such
breaching party shall reimburse the non-breaching party for all such expenses, fees and cash,
including for all expenses, fees and cash incurred in connection with obtaining high yield or other
financing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.15 <U>Notices</U>. All notices, request, demands and other communications hereunder shall
be in writing and shall be delivered personally, by certified or registered mail, return receipt
requested, and postage prepaid, by courier, or by facsimile transmission, addressed as follows:

<P align="left" style="font-size: 10pt; margin-left: 9%">If to Seller:

<P align="left" style="font-size: 10pt; margin-left: 9%">Icahn Associates Corp.<BR>
767 Fifth Avenue, Suite&nbsp;4700<BR>
New York, NY 10153

<P align="left" style="font-size: 10pt; margin-left: 9%">If to Purchaser:

<P align="left" style="font-size: 10pt; margin-left: 9%">American Real Estate Partners, L.P.<BR>
100 South Bedford Rd.<BR>
Mt. Kisco, NY 10549

<P align="left" style="font-size: 10pt; margin-left: 9%">With a copy to:

<P align="left" style="font-size: 10pt; margin-left: 9%">Debevoise &#038; Plimpton LLP<BR>
919 Third Avenue<BR>
New York, NY 10022<BR>
Attention: William D. Regner

<P align="left" style="font-size: 10pt">or to such other address as a party may from time to time designate in writing in accordance with
this Section. Each notice or other communication given to any party hereto in accordance with




<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">the
provisions of this Agreement shall be deemed to have been received (a)&nbsp;on the Business Day it is
sent, if sent by personal delivery, (b)&nbsp;the earlier of receipt of three Business Days after having
been sent by certified or registered mail, return receipt requested and postage prepaid, (c)&nbsp;on the
Business Day it is sent, if sent by facsimile transmission and an activity report showing the
correct facsimile number of the party on whom notice is served and the correct number of pages
transmitted is obtained by the sender (provided, however, that such notice or other communication
is also sent by some other means permitted by this Section&nbsp;12.15, or (d)&nbsp;on the first Business Day
after sending, if sent by courier or overnight delivery.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.16 <U>Further Assurances</U>. Each of 12.17 the parties hereto covenants and agrees that,
from time to time subsequent to Closing, it will, at the request of the other party, execute and
deliver (or, in the case of Purchaser, cause AREH or AREP Oil and Gas to execute and deliver) all
such documents, including, without limitation, all such additional conveyances, transfers, consents
and other assurances and do all such other acts and things as such other party may from time to
time request be executed or done in order to better evidence, perfect or effect any provision of
this Agreement, or of any agreement or other document executed pursuant to this Agreement, or any
of the respective obligations intended to be created hereby or thereby.


<P align="center" style="font-size: 10pt"><B>&#091;Signature Page Follows&#093;</B>



<P align="center" style="font-size: 10pt">34</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
officer of each party hereto as of the date first above written.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>Gascon Partners</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">By: Cigas Corp., its managing general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp;Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp; Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>American Real Estate Partners, L.P.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">By: American Property Investors, Inc.,<BR>
its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Keith A. Meister</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp; Keith A. Meister<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp;President and Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>For Purposes of Section&nbsp;1.4 only:</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>CIGAS CORP</B>.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp; Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp;Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>ASTRAL GAS CORP.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp; Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp;Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>For Purposes of Section&nbsp;5.2(c) only:</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>BARBERRY CORP</B>.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp; Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp;Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>HIGH COAST LIMITED PARTNERSHIP</B><BR>
By: Little Meadow Corp., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:&nbsp;Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:&nbsp;Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Membership Interest Purchase Agreement between Gascon Partners and AREP with respect<BR>
to interest in NEGH.&#093;



<P align="center" style="font-size: 10pt">&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><B>GUARANTY</B>: The undersigned hereby guarantees the payment and performance by each of Gascon
Partners, Cigas Corp. and Astral Gas Corp. of all of its respective duties and obligations under
this Agreement when due.



<P align="left" style="font-size: 10pt"><B>BARBERRY CORP.</B>



<P align="left" style="font-size: 10pt">By: <U>/s/ Edward E. Mattner</U><BR>
Name: Edward E. Mattner<BR>
Title: Authorized Signatory


<P align="center" style="font-size: 10pt">&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><U>Exhibit&nbsp;A</U>



<P align="center" style="font-size: 10pt"><U>Assignment and Assumption Agreement</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assignment and Assumption Agreement, dated as of &#95;&#95;&#95;, 2005, among American Real Estate
Partners, L.P.(&#147;AREP&#148;), American Real Estate Holdings Limited Partnership (&#147;AREH&#148;), AREP Oil &#038; Gas
LLC (&#147;AREP Oil and Gas&#148;), AREP/NEG MP LLC (&#147;AREP/NEG&#148;) and Gascon Partners (&#147;Gascon&#148;). Capitalized
terms used herein shall have the meanings attributed to them in the Membership Interest Purchase
Agreement, dated as of even date herewith, between AREP and Gascon (the &#147;Membership Interest
Purchase Agreement&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the purchase and sale of the membership interests in accordance with the
Membership Purchase Agreement, Purchaser, AREH, AREP Oil and Gas and Seller agree as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Gascon hereby transfers and conveys all of its right, title and interest in, to and under
the Operating Agreement of NEG Holding LLC (the &#147;Company&#148;) to AREP (the &#147;AREP Transfer&#148;).
Simultaneously with the AREP Transfer, AREP hereby transfers and conveys all of its right, title
and interest in, to and under the Operating Agreement to AREH (the &#147;AREH Transfer&#148;).
Simultaneously with the AREH Transfer, AREH hereby transfers and conveys all of its right, title
and interest in, to and under the Operating Agreement to AREP Oil and Gas (the &#147;AREP Oil and Gas
Transfer&#148;). Simultaneously with the AREP Oil and Gas Transfer, AREP Oil and Gas hereby transfers
and conveys all of its right, title and interest in, to and under the Operating Agreement to
AREP/NEG.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2 Each of such transferees hereby accepts all of Gascon&#146;s right, title and interest in, to and
under the Operating Agreement as contemplated above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;As a result of the foregoing, AREP/NEG is the owner of the Membership Interest and is
hereby admitted as a member of the Company having all of the rights, powers and interest formerly
owned by Gascon.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have executed this document on &#95;&#95;&#95;, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>Gascon Partners</B><BR>
By: Cigas Corp., its managing general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Assignment and Assumption Agreement between Gascon Partners, AREP, AREH and AREP<BR>
Oil &#038; Gas with respect to the membership interest in NEGH&#093;



<P align="center" style="font-size: 10pt">&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>American Real Estate Partners, L.P.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: American Property Investors, Inc., its general partner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:<BR>
Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>American Real Estate Holdings Limited Partnership</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: American Property Investors, Inc., its general partner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:<BR>
Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>AREP Oil &#038; Gas LLC</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:<BR>
Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>AREP/NEG MGP LLC</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">ACKNOWLEDGED AND AGREED TO:



<P align="left" style="font-size: 10pt">NEG HOLDING LLC


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>

    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Assignment and Assumption Agreement between Gascon Partners, AREP, AREH and AREP<BR>
Oil &#038; Gas with respect to the membership interest in NEGH&#093;



<P align="center" style="font-size: 10pt">&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U>Exhibit&nbsp;B</U>



<P align="center" style="font-size: 10pt"><U>Form&nbsp;Of Registration Rights Agreement </U>



<P align="center" style="font-size: 10pt">&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U>ANNEX A</U>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Oil Price ($/Bbl)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gas Price ($/mcf)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.267</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>y05076exv99w2.htm
<DESCRIPTION>EX-99.2: AGREEMENT AND PLAN OF MERGER
<TEXT>
<HTML>
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<TITLE>EXHIBIT 99.2</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">EXHIBIT 99.2



<P align="center" style="font-size: 10pt">AGREEMENT AND PLAN OF MERGER



<P align="center" style="font-size: 10pt">Dated as of January&nbsp;21, 2005



<P align="center" style="font-size: 10pt">by and among



<P align="center" style="font-size: 10pt">National Onshore LP,



<P align="center" style="font-size: 10pt">Highcrest Investors Corp.



<P align="center" style="font-size: 10pt">and



<P align="center" style="font-size: 10pt">TransTexas Gas Corporation




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE I</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>TERMS OF THE MERGER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Merger
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organizational Documents of Partnership
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Officers of Partnership
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effective Time
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Closing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions at the Closing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Treatment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE II</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Shareholder
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consents and Approvals
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brokers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE III</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER RELATING TO THE CORPORATION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization of Corporation; Authority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Adverse Effects or Changes
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Properties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims Against Officers and Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Law
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undisclosed Liabilities
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Related Parties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Matters
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employees, Labor Matters, etc.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Benefit Plans
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Personal Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contracts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oil and Gas Properties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE IV</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of the Partnership
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE V</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>COVENANTS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Business Prior to Closing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Efforts to Consummate Transaction
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Returns
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE VI</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by Shareholder
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shareholder&#146;s Certificates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Adverse Change
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">6.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Reserve Reports
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE VII</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">7.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">7.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by the Partnership
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">7.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Partnership&#146;s Certificate
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">7.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE VIII</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>TERMINATION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effect of Termination
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE IX</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>INDEMNIFICATION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnification by Shareholder
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Third Party Claims; Assumption of Defense
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Settlement or Compromise
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Failure of Indemnifying Person to Act
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">9.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Character
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE X</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>DEFINITIONS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ARTICLE XI</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>MISCELLANEOUS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investigation
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations and Warranties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Third Party Beneficiary
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment; Binding Effect
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalid Provisions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Jury Trial
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent to Jurisdiction
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT AND PLAN OF MERGER (the or this &#147;Agreement&#148;) dated as of January&nbsp;21, 2005 is
made and entered into by and between National Onshore LP, a Delaware limited partnership (the
&#147;<U>Partnership</U>&#148; or after the Effective Time, the &#147;<U>Surviving Entity</U>&#148;), Highcrest
Investors Corp., a Delaware corporation (&#147;<U>Shareholder</U>&#148;), and TransTexas Gas Corporation, a
Delaware corporation (the &#147;<U>Corporation</U>&#148;). Capitalized terms not otherwise defined herein
have the meanings set forth in Article&nbsp;X.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Partnership is a limited partnership duly formed and validly existing under the
laws of the State of Delaware;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Corporation is a corporation duly organized and validly existing under the laws
of the State of Delaware;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Shareholder owns 100% of the outstanding common stock of the Corporation, par value
$.01 per share (the &#147;<U>TransTexas Common Stock</U>&#148;);


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the General Corporation Law of Delaware, 8 <U>Del.</U> <U>C.</U> &#167;&#167; 101 <U>et</U>
<U>seq</U>. (the &#147;<U>GCL</U>&#148;), and the Delaware Revised Uniform Limited Partnership Act, 6
<U>Del.</U> <U>C.</U> &#167;&#167; 17-101 <U>et seq</U>. (the &#147;<U>LP Act</U>&#148;), each permits a
corporation organized and existing under the GCL to merge with and into a limited partnership
formed and existing under the LP Act; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the general partner and the limited partner of the Partnership and the board of
directors of the Corporation have duly authorized the merger of the Corporation with and into the
Partnership pursuant to the terms of this Agreement and the Shareholder&#146;s board of directors has
taken action authorizing the Shareholder to approve and adopt this Agreement as the sole
stockholder of the Corporation;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is agreed that, in accordance with the applicable statutes of the State of
Delaware, the Corporation shall be, at the Effective Time, merged with and into the Partnership
(the &#147;<U>Merger</U>&#148;), with the Partnership to be the Surviving Entity. The mode of carrying the
Merger into effect shall be as follows:


<P align="center" style="font-size: 10pt"><B>ARTICLE I<BR>
TERMS OF THE MERGER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>The Merger</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;At the Effective Time and subject to the terms and conditions set forth in this Agreement,
all of the TransTexas Common Stock outstanding immediately prior to the Effective Time, by virtue
of the Merger and without any action on the part of Shareholder, shall be canceled and converted
into the right to receive an amount in cash to be determined in accordance with Section&nbsp;1.1(c) (the
&#147;<U>Merger Price</U>&#148;). The Merger Price shall be paid by the Partnership to Shareholder upon
surrender of the certificate(s) formerly representing the TransTexas Common Stock. The shares of
TransTexas Common Stock converted into the right
to receive the Merger Price are hereinafter referred to collectively as the &#147;<U>Merger
Shares</U>&#148;. All such Merger Shares, from and after the Effective Time, shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and Shareholder shall
cease to have any rights


<P align="center" style="font-size: 10pt">1</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">with respect thereto, except the right to receive the Merger Price
therefor upon the surrender of such certificate(s) to the Partnership.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;On or before the fifth Business Day prior to the anticipated Closing Date (the
&#147;<U>Closing Statement Date</U>&#148;), Shareholder will deliver to Partnership (i)&nbsp;true and correct
copies of the 2004 Reserve Reports, and (ii)&nbsp;a statement (the &#147;<U>Closing Statement</U>&#148;),
certified by an officer of Shareholder, setting forth



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A good faith estimate of the volume of any oil or natural gas imbalance owed by the
Corporation and the Subsidiaries with respect to the Oil and Gas Interests as of December
31, 2004 (collectively, the &#147;<U>Imbalance</U>&#148;);



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A good faith estimate of the value of the Imbalance, net of royalties, taxes,
overriding royalties and other burdens (the &#147;<U>Imbalance Value</U>&#148;); and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a calculation of the Merger Price determined in accordance with Section&nbsp;1.1(c).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All statements, reports, materials and other supporting documentation delivered under this
Section&nbsp;1.1(b) shall be in form and content reasonably satisfactory to Buyer;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Merger Price shall be $180&nbsp;million in cash, provided that:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Merger Price shall be decreased by the Imbalance Value.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Adjusted Purchase Amount is less than $180&nbsp;million, the Merger Price shall
be decreased by the amount of such difference, <U>provided</U> that if the &#147;Adjusted
Purchase Amount&#148; pursuant to the NEG Agreement exceeds $329&nbsp;million and/or the &#147;Adjusted
Purchase Amount&#148; pursuant to the Panaco Agreement exceeds $125&nbsp;million, the amount of such
excess shall be applied to reduce the reduction of the Merger Price hereunder except to the
extent any such excess has been applied to reduce the reduction of the &#147;Merger Price&#148;
pursuant to the Panaco Agreement or the Purchase Price in the NEG Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;At the Effective Time, the general partnership interest held by Onshore GP LLC, a Delaware
limited liability company (the &#147;<U>General Partner</U>&#148;) in the Partnership, and the limited
partnership interest held by Onshore LP LLC, a Delaware limited liability company (the &#147;<U>Limited
Partner</U>&#148;) in the Partnership, immediately prior to the Effective Time shall remain outstanding,
and the General Partner and the Limited Partner shall continue as the general partner and limited
partner, respectively, of the Surviving Entity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Organizational Documents of Partnership</U>. From and after the Effective Time, and until
thereafter amended as provided by law, the Certificate of Limited Partnership and Limited
Partnership Agreement of the Partnership as in effect immediately prior to the Effective Time shall
be the Certificate of Limited Partnership and Limited Partnership Agreement of the Surviving
Entity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Officers of Partnership</U>. From and after the Effective Time, and until their
successors are duly elected or appointed, or until their earlier death, resignation or removal, the


<P align="center" style="font-size: 10pt">2</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">partners and officers of the Surviving Entity shall be the same as the partners and officers of the
Partnership immediately prior to the Effective Time.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Effective Time</U>. A certificate of merger to effect the Merger (&#147;<U>Certificate of
Merger</U>&#148;) shall be filed on the Closing Date (as hereinafter defined) with the Secretary of
State of the State of Delaware (&#147;<U>Secretary of State</U>&#148;) pursuant to the GCL and the LP Act
and shall specify that the Merger shall become effective upon the filing of the Certificate of
Merger (such time of effectiveness, the &#147;<U>Effective Time</U>&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Closing</U>. Upon the terms and subject to the conditions of this Agreement, the closing
of the transactions contemplated hereby (the &#147;<U>Closing</U>&#148;) shall take place (a)&nbsp;at the offices
of the Partnership, located at 100 South Bedford Road, Mt. Kisco, NY at 10:00 a. m., local time, on
the second business day immediately following the day on which the last to be satisfied or waived
of the conditions set forth in Articles VI and VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived in accordance herewith or (b)&nbsp;at such other time, date or
place as the Corporation and the Partnership may agree. The date on which the Closing occurs is
herein referred to as the &#147;<U>Closing Date</U>.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Actions at the Closing</U>. At the Closing: (i)&nbsp;Shareholder shall deliver to the
Partnership one or more certificates representing the TransTexas Common Stock; (ii)&nbsp;the Partnership
shall deliver to Shareholder the Merger Price and the certificate described in Section&nbsp;7.3; (iii)
Shareholder shall deliver or cause to be delivered to the Partnership the certificate described in
Section&nbsp;6.3; and (iv)&nbsp;Shareholder and Partnership shall cause the Certificate of Merger to be filed
as provided in Section&nbsp;1.4 hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Tax Treatment</U>. The Shareholder and Partnership agree and acknowledge that the
transfer of the Corporation&#146;s assets (subject to its liabilities) pursuant to the Merger and the
Shareholder&#146;s receipt of the Merger Price constitutes a taxable sale for federal income tax purposes.


<P align="center" style="font-size: 10pt"><B>ARTICLE II</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to the Partnership to enter into this Agreement, Shareholder hereby makes the
following representations and warranties to the Partnership:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Organization of Shareholder</U>. Shareholder is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Shareholder has full
organizational power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby, including without
limitation, to sell and transfer (pursuant to this Agreement) the TransTexas Common Stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Authority</U>. The execution and delivery by Shareholder of this Agreement, and the
performance by Shareholder of its obligations hereunder, have been duly and validly authorized


<P align="center" style="font-size: 10pt">3</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">by
Shareholder&#146;s board of directors and stockholders and no other action on the part of Shareholder,
its board of directors or stockholders is necessary for such execution, delivery or performance.
This Agreement has been duly and validly executed and delivered by Shareholder and constitutes a
legal, valid and binding obligation of Shareholder, enforceable against Shareholder in accordance
with its terms. The Shareholder&#146;s board of directors has authorized its officers to execute and
deliver to the Corporation a unanimous written consent of the Shareholder, as the sole stockholder
of the Corporation, approving and adopting this Agreement (&#147;<U>Written Consent</U>&#148;).



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Title</U>. The delivery of the TransTexas Common Stock and other instruments of
transfer delivered by Shareholder to the Partnership at the Closing will transfer to the
Partnership good and valid title to the TransTexas Common Stock, free and clear of all Liens.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>No Conflicts</U>. The execution and delivery by Shareholder of this Agreement do not,
and the performance by Shareholder of its obligations under this Agreement and the consummation of
the transactions contemplated hereby will not:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with or result in a violation or breach of any of the terms, conditions or
provisions of the organizational documents of Shareholder and the Corporation;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with or result in a violation or breach of any term or provision of any Law or
Order applicable to Shareholder, the Subsidiaries or any of the Assets and Properties of the
Corporation or the Subsidiaries; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Shareholder, the Corporation or the
Subsidiaries to obtain any consent, approval or action of, make any filing with or give any notice
to any Person as a result or under the terms of, (iv)&nbsp;result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to, or (v)&nbsp;result in the
creation or imposition of any Lien upon Shareholder or any of its Assets and Properties under, any
Contract or License to which Shareholder is a party or by which any of its Assets and Properties is
bound.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Consents and Approvals</U>.
Except for (i)&nbsp;the approval of depositary unit holders of the Purchaser required by the New
York Stock Exchange, and (ii)&nbsp;approvals to amend the Purchaser&#146;s amended and restated agreement of
limited partnership, dated as of May&nbsp;12, 1987, as amended, as contemplated by Section&nbsp;7.7 hereof,
no consent, authorization or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is necessary in connection
with the execution, delivery and performance by Shareholder of this Agreement or the consummation
of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Brokers</U>. Neither Shareholder nor the Corporation nor any Subsidiary has used any
broker or finder in connection with the transactions contemplated hereby, and neither the
Partnership nor any Affiliate of the Partnership has or shall have any liability or otherwise
suffer or incur any Loss as a result of or in connection with any brokerage or finder&#146;s fee or
other commission of any Person retained or purporting to be retained by Shareholder or by the
Corporation or any Subsidiary in connection with any of the transactions contemplated by this
Agreement.


<P align="center" style="font-size: 10pt">4</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Corporation, any Subsidiary or Shareholder to the Partnership or any representative
or Affiliate of the Partnership in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.


<P align="center" style="font-size: 10pt"><B>ARTICLE III</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES<BR>
OF SHAREHOLDER RELATING TO THE CORPORATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to the Partnership to enter into this Agreement, Shareholder hereby makes the
following representations to the Partnership, except as set forth in the Disclosure Schedule
attached to this Agreement (it being agreed that any exceptions to such representations and
warranties shall clearly identify the sections of this Agreement to which they apply).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Due Organization of Corporation; Authority</U>. (a) (a)&nbsp;The Corporation and each of
the Subsidiaries is duly organized and validly existing under the laws of the state in which it is
incorporated or organized, as the case may be, with all requisite power and authority to own, lease
and operate its properties and to carry on its business as they are now being owned, leased,
operated and conducted. The Corporation and each of the Subsidiaries is licensed or qualified to
do business and is in good standing (where the concept of &#147;good standing&#148; is applicable) as a
foreign corporation in each jurisdiction where the
nature of the properties owned, leased or operated by it and the business transacted by it
require such licensing or qualification (except, with respect to the Subsidiaries, where the
failure to be so licensed or qualified or be in good standing will not in the aggregate adversely
affect the validity or enforceability of this Agreement or have a Material Adverse Effect on any of
the Subsidiaries).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Shareholder has delivered to the Partnership true, correct and complete copies of the
organizational documents of the Corporation and the Subsidiaries, which organizational documents
are in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Corporation&#146;s board of directors has duly authorized and approved this Agreement and,
subject to the due execution and delivery of the Written Consent by the Shareholder, this Agreement
has been duly authorized by the Corporation by all necessary corporate action.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Capitalization</U>. Immediately prior to the Closing, the Shareholder will own the
TransTexas Common Stock, free and clear of all Liens. The Corporation owns 100% of the outstanding
capital stock of each of Galveston Bay Pipeline Company, a Delaware corporation (&#147;<U>Galveston
Pipeline</U>&#148;), and Galveston Bay Processing Corporation, a Delaware corporation (&#147;<U>Galveston
Processing</U>&#148;). No Person holds any option, warrant, convertible security or other right to
acquire any interest in the Corporation or any of the Subsidiaries. There are no obligations,
contingent or otherwise, of the Corporation or the Subsidiaries to repurchase, redeem or otherwise
acquire any ownership interests of the Corporation or any Subsidiary or to


<P align="center" style="font-size: 10pt">5</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">provide funds to or make
any material investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other Person.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Subsidiaries</U>. The Corporation has no subsidiaries other than Galveston Pipeline
and Galveston Processing. Neither of Galveston Pipeline or Galveston Processing has any
Subsidiaries. Except for its interests in the Subsidiaries, neither the Corporation nor any of the
Subsidiaries owns directly or indirectly any ownership or other investment interest, either of
record, beneficially or equitably, in any Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Financial Statements</U>. (a)&nbsp;The Shareholder has delivered to the Partnership true,
correct and complete copies of the Audited Financial Statements. The Audited Financial Statements
have been prepared in accordance with GAAP consistently applied and present fairly the financial
position, assets, liabilities and retained earnings of the respective companies as of the dates
thereof and the revenues, expenses, results of operations, and cash flows of the respective
companies for the periods covered thereby. The Audited Financial Statements are in accordance with
the books and records of the respective companies, do not reflect any transactions which are not
bona fide transactions and do not contain any untrue statement of a material fact (whether or not
required to be disclosed under GAAP) or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were made, not
misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Shareholder has delivered to the Partnership true and complete copies of the Interim
2004 Financial Statements. The Interim 2004 Financial Statements present fairly the financial
position, assets, liabilities and retained earnings of the respective companies as of the dates
thereof and the revenues, expenses, results of operations, and cash flows of the respective
companies for the periods covered thereby. The Interim 2004 Financial Statements are in accordance
with the books and records of the respective companies, do not reflect any transactions which are
not bona fide transactions and do not contain any untrue statement of a material fact (whether or
not required to be disclosed under GAAP) or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were made, not
misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>No Adverse Effects or Changes</U>. Since December&nbsp;31, 2003, (i)&nbsp;neither the
Corporation nor any of the Subsidiaries has suffered any Material Adverse Effect; (ii)&nbsp;there has
been no change, event, development, damage or circumstance affecting the Corporation or the
Subsidiaries that, individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect on the Corporation or any of the Subsidiaries; (iii)&nbsp;there has not been any change
by the Corporation or any of the Subsidiaries in its accounting methods, principles or practices,
or any revaluation by the Corporation or any of the Subsidiaries of any of its assets, including
writing down the value of inventory or writing off notes or accounts receivable; and (iv)&nbsp;the
Corporation and each of the Subsidiaries has conducted its business only in the ordinary course of
business consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 <U>Title to Properties</U>. Each of the Subsidiaries has good and marketable title to,
and each Subsidiary is the lawful owner of, all of the tangible and intangible assets, properties
and rights used in connection with its respective businesses and all of the tangible and intangible
assets, properties and rights reflected in the Financial Statements, except for changes accruing in
the ordinary course of business that would not, individually or in the aggregate, adversely affect


<P align="center" style="font-size: 10pt">6</DIV>

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<P align="left" style="font-size: 10pt">the ability of the Corporation or any of the Subsidiaries to conduct its business in the ordinary
course, consistent with past practice.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <U>Litigation</U>. Except as disclosed in the Financial Statements, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations, with such exceptions as are individually, or in the aggregate, not
material in nature or amount, pending or, to the Knowledge of Shareholder, threatened against or
affecting the Corporation, the Subsidiaries or any of their respective officers, directors,
employees or agents in their capacity as such, or any of the Corporation&#146;s Assets and Properties or
businesses of the Corporation or any of the Subsidiaries, and to Shareholder&#146;s Knowledge, there are
no facts or circumstances which may give rise to any of the foregoing. Except as disclosed in the
Financial Statements, neither the Corporation nor any of the Subsidiaries is subject to any order,
judgment, decree, injunction, stipulation or consent order of or with any court or other
Governmental Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 <U>Claims Against Officers and Directors</U>.
There are no pending or, to the Shareholder&#146;s Knowledge, threatened claims against any
director, officer, employee or agent of the Corporation, the Subsidiaries or any other Person,
which could give rise to any claim for indemnification against the Corporation or the Subsidiaries
or cause the Corporation or the Subsidiaries to incur any material liability or otherwise suffer or
incur any material Loss.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 <U>Insurance</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation and/or the Subsidiaries maintain insurance policies that provide adequate
and suitable insurance coverage for the business of the Corporation and are on such terms, cover
such risks and are in such amounts as the insurance customarily carried by comparable companies of
established reputation similarly situated and carrying on the same or similar business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, Shareholder has delivered to the Partnership all insurance
policies (including policies providing property, casualty, liability, workers&#146; compensation, and
bond and surety arrangements) under which the Corporation and the Subsidiaries are an insured, a
named insured or otherwise the principal beneficiary of coverage. All insurance policies of the
Corporation and the Subsidiaries are in full force and effect. The Corporation and the
Subsidiaries have not received notice of any refusal of coverage with respect to an existing
policy. The Corporation and the Subsidiaries have paid all premiums due under all such policies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <U>Compliance with Law</U>. Except as set forth in the Financial Statements, the
Corporation and the Subsidiaries are in compliance and, at all times, have been in compliance in
all respects with all applicable Laws relating to the Corporation or the Subsidiaries or their
respective Assets and Properties or businesses. Except as disclosed in the Financial Statements,
no investigation or review by any Governmental or Regulatory Authority or self-regulatory authority
is pending or, to Shareholder&#146;s Knowledge, threatened, nor has any such authority indicated orally
or in writing to the Shareholder, the Corporation or any of the Subsidiaries an intention to
conduct an investigation or review of the Corporation or any of the Subsidiaries or, with respect
to the Corporation or any of the Subsidiaries, or Shareholder.


<P align="center" style="font-size: 10pt">7</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <U>Undisclosed Liabilities</U>. Except as disclosed in the Financial Statements,
neither the Corporation nor any of the Subsidiaries has any material liabilities or obligations of
any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, other than liabilities and obligations incurred after September&nbsp;30, 2004 in the
ordinary course of business consistent with past practice (including as to amount and nature).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12 <U>Related Parties</U>. Except for the Management Agreement with National Energy Group
Inc. and the Restructured Oil &#038; Gas Note with Thornwood Associates, purchased by AREP Oil &#038; Gas LLC
(the &#147;Restructured Note&#148;), and except as set forth on Schedule&nbsp;3.12 or as otherwise disclosed
in the Financial Statements, and except for transactions between the Corporation and the
Subsidiaries or between the Corporation&#146;s Subsidiaries, (i)&nbsp;no Affiliate of the Corporation is a
party to any Contract with the Corporation or any of the Subsidiaries; (ii)&nbsp;no Affiliate of the
Corporation owes any material amount of money to, nor is such Affiliate owed any material amount of
money by, the Corporation or any of the Subsidiaries, (iii)&nbsp;neither the Corporation nor any of the
Subsidiaries has, directly or indirectly, guaranteed or assumed any indebtedness for borrowed money
or otherwise for the benefit of an Affiliate of the Corporation or any of the Subsidiaries; and
(iv)&nbsp;neither the Corporation nor any of the Subsidiaries has made any material payment to, or
engaged in any material transaction with, an Affiliate of the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13 <U>Intellectual Property</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation and the Subsidiaries own, or possess adequate rights to use, all material
patents, trade names, trademarks, copyrights, inventions, processes, designs, formulae, trade
secrets, know-how, seismic data and other intellectual property rights necessary for, used or held
for use in the conduct of their businesses. All material intellectual property necessary for used
or held for use in the conduct of the businesses of the Corporation and any of the Subsidiaries has
been duly registered with, filed in or issued by the relevant filing offices, domestic or foreign,
to the extent necessary or desirable to ensure full protection under any applicable Law, and such
registrations, filings or issuances remain in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The conduct of the business of the Corporation and the Subsidiaries does not infringe or
otherwise conflict with any rights of any Person in respect of intellectual property rights. None
of the intellectual property rights owned by the Corporation or the Subsidiaries is being infringed
or otherwise, in any way, used or available for use by any Person without a license or permission
from the Corporation and the Subsidiaries and neither the Corporation nor any of the Subsidiaries
has taken or omitted to take any action which would have the effect of waiving any of its rights
thereunder. Neither the Corporation nor any of the Subsidiaries has received a claim of
infringement or conflict by any third party in respect of any intellectual property used by the
Corporation or the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.14 <U>Environmental Matters</U>. Except as set forth on Schedule&nbsp;3.14 or in the Financial
Statements:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation and each of the Subsidiaries have obtained all material Environmental
Permits that are required with respect to their respective Assets and Properties and businesses,
either owned or leased;


<P align="center" style="font-size: 10pt">8</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Corporation, each of the Subsidiaries, and their respective Assets and Properties and
businesses, are and have been in compliance in all material respects with all terms and conditions
of all applicable Environmental Laws and Environmental Permits;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no Environmental Claims pending or, to the Knowledge of Shareholder, threatened
against the Corporation or any of the Subsidiaries. Neither the Corporation nor any of the
Subsidiaries has received any notice from any Governmental or Regulatory Authority or any person of
any violation or liability arising under any Environmental
Law or Environmental Permit in connection with its Assets and Properties, businesses or
operations;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the Corporation, nor any of its Subsidiaries, nor any other Person has caused or
taken any action that will result in any material liability, obligation or cost on the part of the
Corporation or any of its Subsidiaries relating to (x)&nbsp;environmental conditions on, above, under or
from any properties or assets currently or formerly owned, leased, operated or used by the
Corporation or any of its Subsidiaries, or (y)&nbsp;the past or present use, management, transport,
treatment, generation, storage, disposal, release or threatened release of Hazardous Materials.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Neither the Corporation nor any of the Subsidiaries owns, leases or operates or has owned,
leased or operated, any property listed on the National Priorities List pursuant to CERCLA or on
the CERCLIS or on any other federal or state list as sites requiring investigation or cleanup;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Corporation nor any of the Subsidiaries is transporting, has transported, or
is arranging for the transportation of, any Hazardous Material to any location which is listed on
the National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state
list or which is the subject of federal, state or local enforcement actions or other investigations
that may lead to material claims against the Corporation or the Subsidiaries for investigative or
remedial work, damage to natural resources, property damage or personal injury including claims
under CERCLA;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;There are no sites, locations or operations at which the Corporation or any of the
Subsidiaries is currently undertaking, or has completed, any investigative, remedial, response or
corrective action as required by Environmental Laws;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;There are no physical or environmental conditions existing on any property owned or leased
by the Corporation or the Subsidiaries resulting from their respective operations or activities,
past or present, at any location, that would give rise to any material on-site or off-site
investigative or remedial obligations or any corrective action under any applicable Environmental
Laws; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Shareholder has provided to the Partnership all material environmental site
assessments, audits, investigations and studies in its possession, custody or control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.15 <U>Employees, Labor Matters, etc</U>. Except as set forth in the Financial Statements,
neither the Corporation nor any of the Subsidiaries is a party to or bound by, and none of their
employees is subject to, any collective bargaining agreement, and there are no labor unions or
other organizations representing, purporting to represent or attempting to represent any employees
employed by the Corporation or any of the Subsidiaries. There has not occurred or


<P align="center" style="font-size: 10pt">9</DIV>

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<P align="left" style="font-size: 10pt">been threatened
any material strike, slow down, picketing, work stoppage, concerted refusal to work overtime or
other similar labor activity with respect to any employees of the Corporation or any of the
Subsidiaries. There are no labor disputes currently subject to any grievance procedure,
arbitration or litigation and there is no representation petition pending or threatened with
respect to any employee of the Corporation or any of the Subsidiaries. The Corporation and the
Subsidiaries have complied with all applicable Laws pertaining to the employment or termination of
employment of their
respective employees, including, without limitation, all such Laws relating to labor
relations, equal employment opportunities, fair employment practices, prohibited discrimination or
distinction and other similar employment activities; except for any failure to comply that,
individually and in the aggregate, is not reasonably likely to result in any Material Adverse
Effect.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.16 <U>Employee Benefit Plans</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as set forth in the Financial Statements or accrued thereafter in accordance with
the terms of the Plans as of the date hereof, neither the Corporation nor any of the Subsidiaries
has incurred any material liability, and no event, transaction or condition has occurred or exists
that could result in any material liability, on account of any Plans, including but not limited to
liability for (i)&nbsp;additional contributions required to be made under the terms of any Plan or its
related trust, insurance contract or other funding arrangement with respect to periods ending on or
prior to the date hereof which are not reflected, reserved against or accrued in the Financial
Statements; (ii)&nbsp;breaches by the Corporation or any of the Subsidiaries, or any of their employees,
officers, directors, stockholders, or, to the Knowledge of Shareholder, the trustees under the
trusts created under the Plans, or any other Persons under ERISA or any other applicable Law; or
(iii)&nbsp;income taxes by reason of non-qualification of the Plans. Each of the Plans has been
operated and administered in all material respects in compliance with its terms, all applicable
Laws and all applicable collective bargaining agreements. Since September&nbsp;30, 2004, neither the
Corporation nor any of the Subsidiaries has communicated to any current or former director,
officer, employee or consultant thereof any intention or commitment to amend or modify any Plan, or
to establish or implement any other employee or retiree benefit or compensation plan or
arrangement, which would materially increase the cost to the Corporation or any Subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Each Plan which is intended to be &#147;qualified&#148; within the meaning of section 401(a) of the
Code, and the trust (if any) forming a part thereof has received a favorable determination letter
or is covered by an opinion letter from the Internal Revenue Service and no event has occurred and
no condition exists which could reasonably be expected to result in the revocation of any such
determination. All amendments and actions required to bring each Plan into conformity with the
applicable provisions of ERISA, the Code, and any other applicable Laws have been made or taken.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no pending or threatened claims (and no facts or circumstances exist that could
give rise to any such claims) by or on behalf of any participant in any of the Plans, or otherwise
involving any such Plan or the assets of any Plan, other than routine claims for benefits in the
ordinary course. The Plans are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of Labor, or any other
Governmental or Regulatory Authority.


<P align="center" style="font-size: 10pt">10</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;None of the Plans provides benefits of any kind with respect to current or former
employees, officers, or directors (or their beneficiaries) of the Corporation and the Subsidiaries
beyond their retirement or other termination of employment, other than (<U>i</U>) coverage for
benefits mandated by Section&nbsp;4980B or the Code, (<U>ii</U>) death benefits or retirement benefits
under an employee pension benefit plan (as defined by section 3(2) of ERISA), or (<U>iii</U>)
benefits,
the full cost of which is borne by such current or former employees, officers, directors, or
beneficiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;No Plan sponsored by the Corporation and the Subsidiaries is a &#147;multiemployer plan&#148; within
the meaning of Section&nbsp;4001(a)(3) of ERISA or a &#147;multiple employer plan&#148; as addressed in section
4063 or 4064 of ERISA. No Plan sponsored by the Corporation and the Subsidiaries is subject to
Title IV of ERISA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The consummation of the transactions contemplated by this Agreement will not (alone or in
combination with any other event, including, without limitation, the passage of time) result in (i)
any payment (including, without limitation, severance, unemployment compensation, golden parachute,
bonus payments or otherwise) becoming due under any agreement or oral arrangement to any current or
former director, officer, employee or consultant of the Corporation and the Subsidiaries, (ii)&nbsp;any
increase in the amount of salary, wages or other benefits payable to any director, officer,
employee or consultant of the Corporation and the Subsidiaries, or (iii)&nbsp;any acceleration of the
vesting or timing of payment of any benefits or compensation (including, without limitation, any
increased or accelerated funding obligation) payable to any director, officer, employee or
consultant of the Corporation and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.17 <U>Real Property</U>. Schedule&nbsp;3.17 contains a legal description of each parcel of real
property, leases in real property, or other interests in real property, (including the address
thereof) and a legal description of each parcel in which the Corporation and the Subsidiaries holds
a valid easement to use such parcel (the &#147;Real Property&#148;). The Corporation and the Subsidiaries
have Good and Defensible Title to, or a valid and subsisting leasehold estate, or easement, in each
such parcel of Real Property, free and clear of all Liens other than Permitted Encumbrances. All
of the real property leases in the Real Property are valid, binding, and enforceable in accordance
with their terms, and are in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.18 <U>Tangible Personal Property</U>. The Corporation and the Subsidiaries are in
possession of and has good title to, or have valid leasehold interests in or valid rights under
contract to use, all of the real and personal property used or held for use in the business of the
Corporation and the Subsidiaries, including the interest of the Corporation and the Subsidiaries in
all wells, well and leasehold equipment, pipelines, platforms, facilities, improvements, goods and
other personal property located on or used in connection with the Real Property (the &#147;Fixtures and
Equipment&#148;). All the Fixtures and Equipment is in good working order and condition, ordinary wear
and tear excepted, and its use complies in all material respects with all applicable Laws. All of
the Fixtures and Equipment is adequate for the uses to which they are being put and are sufficient
for the conduct of the business of the Corporation and the Subsidiaries in the manner as conducted
prior to the Closing. The Corporation and the Subsidiaries own all of the Fixtures and Equipment
free and clear of all Liens except the Permitted Encumbrances.


<P align="center" style="font-size: 10pt">11</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.19 <U>Contracts</U>. (a)&nbsp;Schedules 3.19 and 3.17 contains a true and complete list of each
of the following Contracts as of the date hereof:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all Contracts providing for a commitment of employment or consultation services for
a specified term and payments at any one time or in any one year in excess of $100,000;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all Contracts with any Person containing any provision or covenant prohibiting or
materially limiting the ability the Corporation or any of the Subsidiaries to engage in any
business activity or compete with any Person;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) all Contracts relating to indebtedness of the Corporation or any of the
Subsidiaries, other than the Restructured Note;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all Contracts (other than this Agreement) providing for (i)&nbsp;the disposition or
acquisition of any assets or properties that individually or in the aggregate are material
to the business or any of the Subsidiaries or that contain continuing obligations of any of
the Subsidiaries, or (ii)&nbsp;any merger or other business combination involving the Corporation
and the Subsidiaries;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all Contracts (other than this Agreement) that limit or contain restrictions on the
ability of the Corporation and the Subsidiaries to incur indebtedness or incur or suffer to
exist any Lien, to purchase or sell any assets, to change the lines of business in which it
participates or engages or to engage in any merger or other business combination;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) all Contracts establishing any joint venture, strategic alliance or other
collaboration;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) all Contracts with any Person obligating the Corporation and any of the
Subsidiaries to guarantee or otherwise become directly or indirectly obligated with respect
to any liability or obligation in excess of $25,000 in each case or $100,000 in the
aggregate at any one time outstanding;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) all Contracts for the leasing of real property by the Corporation and any of the
Subsidiaries setting forth the address, landlord and tenant for each lease; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) all other Contracts that (i)&nbsp;involve the payment, pursuant to the terms of any
such Contract, by or to the Corporation or any of the Subsidiaries of more than $100,000
annually, (ii)&nbsp;cannot be terminated within 90&nbsp;days after giving notice of termination
without resulting in any material cost or penalty to the Corporation, or (iii)&nbsp;are material
to the businesses of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, true, correct and complete copies of each Contract required to
be disclosed in Schedule&nbsp;3.19 have been delivered to, or made available for inspection by, the
Partnership. Each such Contract is in full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms, of the Corporation and the
Subsidiaries and, of each other party thereto; and neither the Corporation nor, to the Knowledge of
Shareholder, any other party to such Contract, is in violation or breach of or default under any
such Contract (or with notice or lapse of time or both, would be in violation or breach of or



<P align="center" style="font-size: 10pt">12</DIV>


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<P align="left" style="font-size: 10pt">default under any such Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract). All conditions necessary to maintain the
Contracts in force have been duly performed.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.20 <U>Tax</U>. (a)&nbsp;The Corporation and the Subsidiaries have duly and timely filed with
the appropriate taxing authorities all material federal, state and local income Tax Returns and all
other material Tax Returns required to be filed through the date hereof and will duly and timely
file any such returns required to be filed on or prior to the Closing. Such Tax Returns and other
information filed are (and, to the extent they will be filed prior to the Closing, will be)
complete and accurate in all material respects. Neither the Corporation nor the Subsidiaries have
pending any request for an extension of time within which to file federal, state or local income
Tax Returns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All Taxes of the Corporation and the Subsidiaries in respect of periods (or portions
thereof) ending at or prior to the Closing have been paid by the Corporation and the Subsidiaries
or such Taxes (other than income Taxes) are shown as due and payable after the Closing on the
Financial Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;No federal, state, local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any material Taxes or material Tax Returns of the
Corporation or the Subsidiaries. Neither the Corporation nor any of the Subsidiaries has received
a written notice of any such pending audits or proceedings. There are no outstanding waivers
extending the statutory period of limitation relating to the payment of Taxes due from the
Corporation or any of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the IRS nor any other taxing authority (whether domestic or foreign) has asserted
in writing, or to the best Knowledge of the Corporation and the Subsidiaries, is threatening to
assert, against the Corporation or any of the Subsidiaries any material deficiency or material
claim for Taxes in excess of the reserves established therefor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;There are no Liens for Taxes upon any property or assets of the Corporation or any of the
Subsidiaries, except for Liens for Taxes not yet due and payable and liens for Taxes that are being
contested in good faith by appropriate proceedings as set forth on Schedule&nbsp;3.20(e) and as to which
adequate reserves have been established in accordance with GAAP.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Corporation nor the Subsidiaries has any obligation under any Tax sharing
agreement or similar arrangement with any other Person with respect to Taxes of such other Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.21 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Corporation or Shareholder to the Partnership or any representative or Affiliate of
the Partnership in connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.22 <U>Oil and Gas Properties</U>.


<P align="center" style="font-size: 10pt">13</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation and the Subsidiaries have Good and Defensible Title to all Oil and Gas
Properties.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;To the Knowledge of Shareholder (i)&nbsp;all of the Wells of the Corporation and the
Subsidiaries have been drilled and completed within the boundaries of the Oil and Gas properties of
the Corporation and the Subsidiaries or within the limits otherwise permitted by Contract, and by
applicable Laws; and (ii)&nbsp;all drilling and completion of such Wells and all operations with respect
thereto have been conducted in compliance with all applicable Laws, except such violations that
would not or could not reasonably be expected to have a Material Adverse Effect on the Corporation
and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Corporation and the Subsidiaries have all material Licenses necessary for, used or
held for use in the conduct of its businesses.


<P align="center" style="font-size: 10pt"><B>ARTICLE IV<BR>
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Partnership hereby represents and warrants to Shareholder as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Organization of the Partnership</U>. The Partnership is a limited partnership duly
formed, validly existing and in good standing under the Laws of the State of Delaware. The
Partnership has full organizational power and authority to execute and deliver this Agreement and
to perform the Partnership&#146;s obligations hereunder and to consummate the transactions contemplated
hereby, including without limitation to merge with the Corporation pursuant to this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Authority</U>. The execution and delivery by the Partnership of this Agreement, and
the performance by the Partnership of its obligations hereunder, have been duly and validly
authorized and, no other partnership action on the part of the Partnership or its partners is
necessary. This Agreement has been duly and validly executed and delivered by the Partnership and
constitutes a legal, valid and binding obligation of the Partnership enforceable against the
Partnership in accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>No Conflicts</U>. The execution and delivery by the Partnership of this Agreement do
not, and the performance by the Partnership of its obligations under this Agreement and the
consummation of the transactions contemplated hereby, will not:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with, or result in a violation or breach of, any of the terms, conditions or
provisions of the organizational documents of the Partnership;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with, or result in a violation or breach of, any term or provision of any Law or
Order applicable to the Partnership or any of its Assets and Properties (other than such
conflicts, violations or breaches which will not have a Material Adverse Effect on the
Partnership); or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with, or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require the Partnership to obtain any


<P align="center" style="font-size: 10pt">14</DIV>

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<P align="left" style="font-size: 10pt">consent, approval or action
of, make any filing with or give any notice to any Person as a result or under the terms of, (iv)&nbsp;result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or imposition of
any Lien upon the Partnership or any of its Assets and Properties under, any Contract or License to
which the Partnership is a party or by which any of its Assets and Properties is bound.



<P align="center" style="font-size: 10pt"><B>ARTICLE V</B>



<P align="center" style="font-size: 10pt"><B>COVENANTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance of Business Prior to Closing</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Shareholder shall cause each of the Corporation and the Subsidiaries from the date
hereof through the Closing Date to:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) conduct its operations and business according to their usual, regular and ordinary
course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) use all commercially reasonable efforts to keep its business and properties
substantially intact, including its present operation, physical facilities, working
conditions, insurance policies, and relationships with lessors, licensors, suppliers,
customers, employees;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) maintain its corporate existence;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) maintain its books and records and accounts in its usual, regular, and ordinary
manner in compliance with all applicable laws and governmental orders;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) pay and discharge when due all taxes, assessments and governmental charges imposed
upon it or any of its properties, or upon the income or project therefrom in the ordinary
course of business consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) promptly notify the Partnership of any Material Adverse Change to the Corporation
or the Subsidiaries; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) permit representatives of the Partnership to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business operations of the
Corporation and the Subsidiaries, to all premises, properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to the Corporation and
the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the generality of the foregoing, from the date hereof through the
Closing, Shareholder shall not and shall cause each of the Corporation and its Subsidiaries not to:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) engage in any transaction, or take or omit to take any action, that would result in
a breach of any representation or warranty in Article&nbsp;II and III of this Agreement;



<P align="center" style="font-size: 10pt">15</DIV>

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<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) declare, set aside, or pay any dividend;

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) declare or pay any increase in compensation to any officer, director, employee or
agent of the Corporation or any of the Subsidiaries, except in the ordinary course
consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) enter into any Contract that, had it been in effect on the date hereof, would have
been required to be listed on Schedule&nbsp;3.19, except for those Contracts entered into in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) permit, allow or suffer any of its properties, assets or rights to be subject to
any Lien other then Permitted Encumbrances;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) incur any long-term indebtedness;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) make any material capital expenditure or commitment, other than for emergency
repairs or replacement, except for those capital expenditures or commitments made in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) terminate, materially modify, assign, or materially amend any Contract required
to be listed on Schedule&nbsp;3.19, except in the ordinary course consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Efforts to Consummate Transaction</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;From the date hereof through the Closing Date, upon the terms and subject to the
conditions set forth in this Agreement, each of the parties shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. The parties will use their
commercially reasonable efforts and cooperate with one another (i)&nbsp;in promptly determining whether
any filings are required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would result in a Material
Adverse Effect on the Corporation or the Subsidiaries or an event of default, termination or
acceleration of any agreement or any put right under any agreement) under any applicable Law or
regulation or from any Governmental or Regulatory Authority or third parties, and (ii)&nbsp;in promptly
making any such filings, in furnishing information required in connection therewith and in timely
seeking to obtain any such consents, approvals, permits or authorizations. For purposes of this
Section&nbsp;5.2, Shareholder shall not be obligated to make any payment to any
third party as a condition to obtaining such party&#146;s consent or approval, other than for
required filing fees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;From the date hereof through the Closing Date, Shareholder shall give prompt written
notice to the Partnership of: (i)&nbsp;any occurrence, or failure to occur, of any event which
occurrence or the failure would reasonably be expected to cause any representation or warranty of
any of the Shareholder contained in this Agreement, if made on or as of the date of such event or
as of the Closing Date, to be untrue or inaccurate, except for changes permitted by this Agreement
and except to the extent that any representation and warranty is made as of a


<P align="center" style="font-size: 10pt">16</DIV>

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<P align="left" style="font-size: 10pt">specified date, in
which case, such representation and warranty shall be true, complete and accurate as of such date;
or (ii)&nbsp;any failure of the Shareholder, the Corporation, the
Subsidiaries or any officer, general partner, director, employee, consultant or agent of the Shareholder, the Corporation or the
Subsidiaries, to comply with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it or them under this Agreement; provided, however, that no such notification shall
affect the representations or warranties of the Shareholder or the conditions to the obligations of
the Partnership hereunder.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Tax Returns</U>. The Shareholder shall be responsible for filing the Tax Returns of
the Corporation for all periods ending on or before the Effective Time and shall have sole control
over the preparation and filing of such Tax Returns (including, the right to make any Tax
election).


<P align="center" style="font-size: 10pt"><B>ARTICLE VI</B>



<P align="center" style="font-size: 10pt"><B>CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Partnership under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of Shareholder contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be accurate, true and correct in
all material respects on and as of the Closing Date with the same force and effect as though made
by Shareholder on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Compliance by Shareholder</U>. Shareholder shall have duly performed and complied
with all of its covenants, obligations and agreements contained in this Agreement to be performed
and complied with by Shareholder on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Shareholder&#146;s Certificates</U>. The Partnership shall have received a certificate
dated as of the Closing Date executed by an authorized officer of Shareholder certifying as to the
fulfillment and satisfaction of the conditions set forth in Sections&nbsp;6.1 and 6.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>No Material Adverse Change</U>. No Material Adverse Change to the Corporation or the
Subsidiaries shall have occurred and no event shall have occurred which, in the reasonable judgment
of the Partnership, is reasonably likely to have a Material Adverse Effect on the Corporation or
the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by any other Person shall
have been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the
Corporation or the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is
reasonably likely to result in substantial damages in respect of, any provision of the Agreement or
the consummation of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Reserve Reports</U>. PARTNERSHIP shall have received the 2004 Reserve Reports.


<P align="center" style="font-size: 10pt">17</DIV>

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<P align="center" style="font-size: 10pt"><B>ARTICLE VII<BR>
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Shareholder under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of the Partnership contained herein shall have been accurate, true
and correct on and as of the date of this Agreement, and shall also be accurate, true and correct
in all material respects on and as of the Closing Date with the same force and effect as though
made by the Partnership on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Compliance by the Partnership</U>. The Partnership shall have duly performed and
complied with its respective covenants, obligations and agreements contained in this Agreement to
be performed and complied with by the Partnership on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>The Partnership&#146;s Certificate</U>. Shareholder shall have received a certificate
dated as of the Closing Date executed by an authorized officer of the Partnership certifying as to
the fulfillment and satisfying the conditions set forth in Sections&nbsp;7.1 and 7.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the
Corporation or the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is reasonably likely to result in
substantial damages in respect of, any provision of the Agreement or the consummation of the
transactions contemplated hereby.


<P align="center" style="font-size: 10pt"><B>ARTICLE VIII</B>



<P align="center" style="font-size: 10pt"><B>TERMINATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Termination</U>. This Agreement may be terminated at any time on or prior to the
Closing Date:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;By written notice of Shareholder or Partnership, if the Closing shall not have taken place
on or before September&nbsp;30, 2005; <U>provided</U>, however, that the right to terminate this
Agreement under this Section&nbsp;8.1 shall not be available to any party whose willful failure to
fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;By the Partnership, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of Shareholder hereunder, and such breach shall not
have been remedied within ten Business Days after receipt by Shareholder of a notice in writing
from the Partnership specifying the breach and requesting such be remedied; or


<P align="center" style="font-size: 10pt">18</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;By Shareholder, if there shall have been a material breach of any covenant, representation
or warranty or other agreement of the Partnership hereunder, and such
breach shall not have been
remedied within ten Business Days after receipt by the Partnership of notice in writing from
Shareholder specifying the breach and requesting such be remedied.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Effect of Termination</U>. If this Agreement is terminated pursuant to Section&nbsp;8.1
all obligations of the parties hereunder shall terminate, except for the obligations set forth in
Article&nbsp;IX and Article&nbsp;XI, which shall survive the termination of this Agreement, and except that
no such termination shall relieve any party from liability for any prior willful breach of this
Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE IX<BR>
INDEMNIFICATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Indemnification by Shareholder</U>. Shareholder agrees to indemnify the Partnership,
its Affiliates and their respective officers, directors, employees, independent contractors,
stockholders, principals, partners, agents, or representatives (each an &#147;Indemnified Person&#148; and
collectively, the &#147;Indemnified Persons&#148;) against, and to hold each Indemnified Person harmless
from, any and all Losses incurred or suffered by any Indemnified Person relating to or arising out of or in connection with (a)&nbsp;any
breach of or any inaccuracy in any representation or warranty made by Shareholder in this
Agreement, or (b)&nbsp;any breach of or failure by any Shareholder to perform any of its covenants or
obligations set out or contemplated in this Agreement. Notwithstanding any provisions to the
contrary contained herein, the aggregate liability of Shareholder and Barberry Corp. for any and
all obligations under this Agreement shall in no event exceed the Merger Price.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Claims</U>. As promptly as is reasonably practicable after becoming aware of a claim
for indemnification under this Agreement, the Indemnified Person shall promptly give notice to the
Shareholder (&#147;Indemnifying Person&#148;) of such claim and the amount the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying Person of its
obligations except to the extent (if any) that the Indemnifying Person shall have been prejudiced
thereby. If the Indemnifying Person does not object in writing to such indemnification claim
within 30&nbsp;days of receiving notice thereof, the Indemnified Person shall be entitled to recover, on
the thirty-fifth day after such notice was given, from the Indemnifying Person the amount of such
claim, and no later objection by the Indemnifying Person shall be permitted; if the Indemnifying
Person agrees that it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be entitled to recover, on the
thirty-fifth day after such notice was given, from the Indemnifying Person the lesser amount,
without prejudice to the Indemnified Person&#146;s claim for the difference. In addition to the amounts
recoverable by the Indemnified Person from the Indemnifying Person pursuant to the foregoing
provisions, the Indemnified Person shall also be entitled to recover from the Indemnifying Person
interest on such amounts at the rate of Two Times Prime from, and including, the thirty-fifth day
after such notice of an indemnification claim is given to, but not including, the date such
recovery is actually made by the Indemnified Person.


<P align="center" style="font-size: 10pt">19</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Notice of Third Party Claims; Assumption of Defense</U>. The Indemnified Person shall
give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of
any claim, or the commencement of any suit, action or proceeding, by
any Person not a party hereto
(a &#147;<U>Third Party Claim</U>&#148;) in respect of which indemnity may be sought under this Agreement;
provided that the failure of the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent (if any) that the Indemnifying Person
shall have been prejudiced thereby. The Indemnifying Person may, at its own expense, participate
in the defense of any Third Party Claim, suit, action or proceeding (a)&nbsp;upon notice to the
Indemnified Person and (b)&nbsp;upon delivery by the Indemnifying Person to the Indemnified Person a
written agreement that the Indemnified Person is entitled to indemnification for all Losses arising
out of such Third Party Claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any such Third Party
Claim, suit, action or proceeding, assume the defense thereof; provided, however, that (i)&nbsp;the
Indemnifying Person&#146;s counsel is reasonably satisfactory to the Indemnified Person, and (ii)&nbsp;the
Indemnifying Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person&#146;s reasonable request for such consultation from time to time with respect to such Third
Party Claim, suit, action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Person. If,
however, the Indemnified Person reasonably determines in its judgment that representation by the
Indemnifying Person&#146;s counsel of both the Indemnifying Person and the Indemnified Person would
present such counsel with a conflict of interest, then such Indemnified Person may employ separate
counsel to represent or defend it in any such Third Party Claim, action, suit or proceeding and the
Indemnifying Person shall pay all of the fees and disbursements in connection with the retention of
such separate counsel. If the Indemnifying Person fails to promptly notify the Indemnified Party
that the Indemnifying Party desires to defend the Third Party Claim pursuant, or if the
Indemnifying Person gives such notice but fails to prosecute vigorously and diligently or settle
the Third Party Claim, then the Indemnified Party will have the right to defend, at the sole cost
and expense of the Indemnifying Person, the Third Party Claim by all appropriate proceedings, which
proceedings will be prosecuted by the Indemnified Person in good faith or will be settled at the
discretion of the Indemnified Person (with the consent of the Indemnifying Person, which consent
will not be unreasonably withheld). The Indemnified Person will have full control of such defense
and proceedings, including any compromise or settlement thereof. Whether or not the Indemnifying
Person chooses to defend or prosecute any such Third Party Claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Settlement or Compromise</U>. Any settlement or compromise made or caused to be made
by the Indemnified Person or the Indemnifying Person, of any claim, suit, action or proceeding
shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be,
in the same manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise thereof; provided, however, that no
obligation, restriction or Loss shall be imposed on the Indemnified Person as a result of such
settlement without its prior written consent. The Indemnified Person will give the Indemnifying
Person at least 30&nbsp;days&#146; notice of any proposed settlement or compromise of any Third Party Claim,
suit, action or proceeding it is defending, during which time the Indemnifying Person may reject
such proposed settlement or compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full


<P align="center" style="font-size: 10pt">20</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">and complete liability and
responsibility for such Third Party Claim, suit, action or proceeding and any and all Losses in
connection therewith in excess of the amount of unindemnifiable Losses which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Failure of Indemnifying Person to Act</U>. In the event that the Indemnifying Person
does not assume the defense of any Third Party Claim, suit, action or proceeding brought against an
Indemnified Person, then any failure of the Indemnified Person to defend or to participate in the
defense of any such Third Party Claim, suit, action or proceeding or to cause the same to be done,
shall not relieve the Indemnifying Person of any of its obligations under this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Tax Character</U>. Shareholder and the Partnership agree that any payments pursuant to this Article&nbsp;IX will be
treated for federal and state income tax purposes as adjustments to the Merger Price, and that they
will report such payments on all Tax Returns consistently with such characterization.


<P align="center" style="font-size: 10pt"><B>ARTICLE X<BR>
DEFINITIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 Definitions. <U>Defined Terms</U>. As used in this Agreement, the following defined
terms have the meanings indicated below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;2004 Reserve Reports&#148; means the reserve reports prepared and certified by an independent
petroleum reserve engineering firm acceptable to both Partnership and Shareholder which provides
estimates of the net recoverable crude oil and natural gas reserves of the Corporation and the
Subsidiaries, for each of the Reserve Categories, as of January&nbsp;21, 2004. The 2004 Reserve Reports
shall be prepared consistent with industry standards, using methodologies consistent with reserve
reports prepared for the Corporation and its Subsidiaries by independent petroleum reserve
engineering firms for years prior to 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Low Reserve Valuation Amount&#148; means the Low Reserve Valuation Amount minus
$9,750,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted High Reserve Valuation Amount&#148; means the High Reserve Valuation Amount minus
$3,750,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Purchase Amount&#148; means the sum of A and B, where A equals the product of (a)&nbsp;the
difference between the Adjusted High Reserve Valuation Amount and Adjusted Low Reserve Valuation
Amount, and (b)&nbsp;69.4%, and B equals the Adjusted Low Reserve Valuation Amount.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Affiliate&#148; means, with respect to any specified Person, any other Person that, directly or
indirectly, owns or controls, is under common ownership or control with, or is owned or controlled
by, such specified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Agreement&#148; has the meaning ascribed to it in the recitals.


<P align="center" style="font-size: 10pt">21</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Assets and Properties&#148; of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether
tangible or intangible, and
wherever situated), including the goodwill related thereto, operated, owned or leased by such
Person.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Audited Financial Statements&#148; means the consolidated audited financial statements of the
Corporation and its Subsidiaries as of December&nbsp;31, 2003, consisting of the balance sheet at such
date and the related statements of operations, statement of stockholders equity, and cash flows for
the year then ended, each accompanied by the audit report of KPMG LLP, independent public auditors
with respect to the Corporation and its Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business Day&#148; means any day of the year other than (i)&nbsp;any Saturday or Sunday or (ii)&nbsp;any
other day on which commercial banks located in New York City are generally closed for business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business or Condition&#148; of any Person means the business, condition (financial or otherwise),
properties, assets or results of operations or prospects of such Person, taken as a whole.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLA&#148; means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any successor statutes and any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLIS&#148; means the Comprehensive Environmental Response, Compensation and Liability
Information System List.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Certificate of Merger&#148; has the meaning ascribed to it in Section&nbsp;1.4.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing&#148; has the meaning ascribed to it in Section&nbsp;1.5.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Date&#148; has the meaning ascribed to it in Section&nbsp;1.5.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Statement&#148; has the meaning ascribed to it in Section&nbsp;1.1(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Statement Date&#148; has the meaning ascribed to it in Section&nbsp;1.1(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Reserve Value Ranges&#148; means a calculation of the ranges of present values of the net
estimated cash flows for each of the Reserve Categories of the Corporation and the Subsidiaries, as
set forth in the 2004 Reserve Reports, utilizing the ranges of discount rates set forth below, and
based on all of assumptions contained in the 2004 Reserve Reports (except that initial cash prices
per barrel of oil, per mcf of natural gas and per barrel of natural gas liquid shall be as
described in Annex A and adjusted on a well-by-well basis consistent with the methodologies applied
in the 2004 Reserve Reports for items such as transportation, basis differentials, marketing, the
quality of the crude oil and the heating value of the natural gas).

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Reserve Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Discount Rates</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Non-Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">22</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Undeveloped</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Probable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Possible</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contract&#148; means any contract, lease, commitment, understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan, permit or license,
whether written or oral, which is intended or purports to be binding and enforceable.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Corporation&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Dollars&#148; or numbers proceeded by the symbol &#147;$&#148; means amounts in United States Dollars.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Effective
Time&#148; has the meaning ascribed to it in Section&nbsp;1.4.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Claim&#148; means any third party (including, without limitations, Governmental or
Regulatory Authorities and employees) action, lawsuit, claim or proceeding (including claims or
proceedings under OSHA or similar laws relating to safety of employees) that seeks to impose
liability for (a)&nbsp;pollution or contamination of the ambient air, surface water, ground water or
land; (b)&nbsp;solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (c)&nbsp;exposure to hazardous or toxic substances; (d)&nbsp;the safety or
health of employees; or (e)&nbsp;the transportation, processing, distribution in commerce, use or
storage of hydrocarbons or chemical substances. An Environmental Claim includes, but is not
limited to, a common law action, as well as a proceeding to issue, modify or terminate an
Environmental Permit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Law&#148; means any law, rule, regulation or order of other requirements of law
(including common law) any federal, foreign, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority with jurisdiction over the Corporation or
any of the Subsidiaries or any of their respective properties or assets that relates to (a)
pollution or protection of human health, natural resources and the environment, including ambient
air, surface water, ground water or land; (b)&nbsp;solid, gaseous or liquid waste generation, treatment,
storage, disposal or transportation; (c)&nbsp;exposure to Hazardous Materials; (d)&nbsp;the safety or health
of employees; or (e)&nbsp;regulation of the manufacture, processing, distribution in commerce, use or
storage of Hazardous Materials, including hydrocarbons or chemical substances. Environmental Laws
include but are not limited to OSHA, CERCLA, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Safe
Drinking Water Act, as amended, the Superfund Amendments and Reauthorization Act of 1986 (&#147;SARA&#148;),
as amended, the Resource Conservation and Recovery Act of 1976 (&#147;RCRA&#148;), as amended, the Hazardous
and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended,
the Oil Pollution Act of 1990 (&#147;OPA&#148;), as amended, the Hazardous Materials Transportation Act, as
amended, and any other federal, foreign, state and local law whose purpose is to conserve or
protect human health, the environment, wildlife or natural resources.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Permit&#148; means any permit, license, approval or other authorization under any
Environmental Law, applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other subdivision thereof relating to pollution or
protection of health or the environment, including laws, regulations or other requirements

<P align="center" style="font-size: 10pt">23</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">relating
to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous
substances or toxic materials or wastes into ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical subsidiaries, pollutants, contaminants or
hazardous or toxic materials or wastes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ERISA&#148; means the Employee Retirement Income Security Act of 1974, as amended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Financial Statements&#148; means the Audited Financial Statements and the Interim 2004 Financial
Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Fixtures and Equipment&#148; has the meaning ascribed to it in Section&nbsp;3.18.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GAAP&#148; means U.S. generally accepted accounting principles at the time in effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Galveston Pipeline&#148; has the meaning ascribed to it in Section&nbsp;3.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Galveston Processing&#148; has the meaning ascribed to it in Section&nbsp;3.2.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GCL&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;General Partner&#148; has the meaning ascribed to it in Section&nbsp;1.1(d).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Good and Defensible Title&#148; means such right title and interest that is (a)&nbsp;evidenced by an
instrument or instruments filed of record in accordance with the conveyance and recording laws of
the applicable jurisdiction to the extent necessary to prevail against competing claims of bona
fide purchasers for value without notice, and (b)&nbsp;subject to Permitted Encumbrances, free and clear
of all Liens, claims, infringements, burdens and other defects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Governmental or Regulatory Authority&#148; means any court, tribunal, arbitrator, authority,
administrative or other agency, commission, authority, licensing board official or other
instrumentality of the United States or any state, county, city or other political subdivision.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Hazardous Material&#148; means (a)&nbsp;any &#147;hazardous substance,&#148; as defined by CERCLA; (b)&nbsp;any
&#147;hazardous waste&#148; or &#147;solid waste,&#148; in either case as defined by the Resource Conservation and
Recovery Act, as amended; (c)&nbsp;any hazardous, dangerous or toxic chemical, material, waste or
substance, regulated by any Environmental Law; (d)&nbsp;any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof; (e)&nbsp;any asbestos-containing
materials in any form or condition; (f)&nbsp;any polychlorinated biphenyls in any form or condition; (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof; (h)&nbsp;any air pollutant
which is so designated by the U.S. Environmental Protection Agency as authorized by the Clean Air
Act; or (i)&nbsp;any mold or microbial/microbiological contaminants that pose a risk to human health or
the environment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;High Reserve Valuation Amount&#148; means the sum of the high range of the Closing Reserve Value
Ranges (based on the low discount rates) for each of Reserve Categories.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance&#148; has the meaning ascribed to it in Section&nbsp;1.1(b)(i).


<P align="center" style="font-size: 10pt">24</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance Value&#148; has the meaning ascribed to it in Section&nbsp;1.1(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnified
Person&#148; has the meaning ascribed to it in Section&nbsp;9.1.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnifying
Person&#148; has the meaning ascribed to it in Section&nbsp;9.2.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Interim 2004 Financial Statements&#148; means the unaudited internal financial statements of the
Corporation and its Subsidiaries for the nine months ended September&nbsp;30, 2004, consisting of the
balance sheet at such date and the related statements of operations for the period then ended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Knowledge&#148; means, with respect to the Shareholder, the Corporation and/or the Subsidiaries,
in each case the knowledge of any director, officer or senior executive of Shareholder, Corporation
or any Subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Laws&#148; means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of the United States or any state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;License&#148; means licenses, permits, certificates of authority, authorizations, approvals,
registrations, findings of suitability, variances, exemptions, certificates of occupancy, orders,
franchises and similar consents granted or issued by any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lien&#148; means any mortgage, lien (except for any lien for Taxes not yet due and payable),
charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any
third party, easement, encroachment, encumbrance or other adverse claim of any kind or description.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Limited Partner&#148; has the meaning ascribed to it in Section&nbsp;1.1(d).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Loss&#148; or &#147;Losses&#148; means any and all liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including attorneys&#146; fees and expenses and costs of
investigation and litigation).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Low Reserve Valuation Amount&#148; means the sum of the low range of the Closing Reserve Value
Ranges (based on the high discount rates) for each of Reserve Categories.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;LP
Act&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Material Adverse Effect&#148; or &#147;Material Adverse Change,&#148; as to any Person, means a
material adverse change (or circumstance involving a prospective change) in the Business or
Condition of such Person, other than changes resulting from changes or fluctuations in the market
price of oil, gas or natural gas.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger
Price&#148; has the meaning ascribed to it in Section&nbsp;1.1(a).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger
Shares&#148; has the meaning ascribed to it in Section&nbsp;1.1(a).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Order&#148; means any writ, judgment, decree, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).


<P align="center" style="font-size: 10pt">25</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;OSHA&#148; means the Occupational Safety and Health Act, as amended, or any successor statute, and
any regulations promulgated thereunder.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Partnership&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Permitted Encumbrances&#148; means, as applicable,


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;any liens for taxes and assessments not yet delinquent as of the Closing Date;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any Liens or security interests created by law or reserved in oil and gas leases
attributable to any assets or property for royalty, bonus or rental, or created to secure
compliance with the terms of any assets or property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any obligations or duties affecting any assets or property to any municipality or public
authority with respect to any franchise, grant, license or permit, and all applicable Laws, rules
and orders of any Governmental or Regulatory Authority;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;any (i)&nbsp;easements, rights-of-way, servitudes, permits, surface leases and other rights in
respect of surface operations, pipelines, grazing, hunting, fishing, lodging, canals, ditches,
reservoirs or the like, and (ii)&nbsp;easements for streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other similar rights-of-way attributable to any assets or
property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;all lessors&#146; royalties, overriding royalties, net profits interests, carried interests,
production payments, reversionary interests and other burdens on or deductions from the proceeds of
production attributable to any assets or property;

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;all rights attributable to any assets or property with respect to consent by, required
notices to, filings with, or other actions by Governmental or Regulatory Authorities in connection
with the sale or conveyance of oil and gas leases or interests therein to the extent same are
customarily obtained following such sale or conveyance;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;encumbrances securing payments to mechanics and material men and encumbrances attributable
to any assets or property securing payment of taxes or assessments that are, in either case, not yet delinquent or, if delinquent, are being contested in good
faith in the normal course of business;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;all rights attributable to any assets or property with respect to production sales
contracts; division orders; contracts for sale, purchase, exchange, refining, or processing of
hydrocarbons; unitization and pooling designations, declarations, orders and agreements; operating
agreements; agreements of development; gas balancing or deferred production agreements; processing
agreements; plant agreements; pipeline, gathering and transportation agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements; and any and all other
agreements which are ordinary and customary in the oil, gas and other mineral exploration,
development or extraction business, to the extent such declarations, order and agreements described
in the Schedules attached hereto; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Liens incurred under the Restructured Note and all related documentation.




<P align="center" style="font-size: 10pt">26</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Person&#148; means any natural person, corporation, limited liability company, general
partnership, limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Plans&#148; shall mean all material pension and profit sharing, retirement and post retirement
welfare benefit, health insurance benefit (medical, dental and vision), disability, life and
accident insurance, sickness benefit, vacation, employee loan and banking privileges, bonus,
incentive, deferred compensation, workers compensation, stock purchase, stock option, phantom stock
and other equity-based, severance, employment, change of control or fringe benefit plans, programs,
arrangements or agreements, whether written or oral, including any employee benefit plans defined
in Section&nbsp;3(3) of ERISA., maintained or contributed to by the Corporation or any of the
Subsidiaries.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Real Property&#148; has
the meaning ascribed to it in Section&nbsp;3.17.
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Reserve Categories&#148; means (i)&nbsp;proved developed producing, (ii)&nbsp;proved developed
non-producing, (iii)&nbsp;proved undeveloped, (iv)&nbsp;probable, and (v)&nbsp;possible.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Restructured
Note&#148; has the meaning ascribed to it in Section&nbsp;3.12.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Secretary
of State&#148; has the meaning ascribed to it in Section&nbsp;1.4.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Shareholder&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Subsidiaries&#148; means Galveston Pipeline and Galveston Processing.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Surviving
Entity&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax Return&#148; means any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect
to Taxes, including attachments thereto and amendments thereof, and including, without limitation,
information returns, any documents with respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Taxes&#148; means any and all taxes, charges, fees, levies, duties, liabilities, impositions or
other assessments, including, without limitation, income, gross
receipts, profits, excise, real or personal property, environmental, recapture, sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service, license, net worth, payroll, franchise,
gains, stamp, transfer and recording taxes, fees and charges, imposed by the Internal Revenue
Service (&#147;IRS&#148;) or any other taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any
interest whether paid or received, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies, duties, liabilities,
impositions or other assessments.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax&#148; shall have a correlative meaning.


<P align="center" style="font-size: 10pt">27</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Third Party Claim&#148; has the meaning ascribed to it in Section&nbsp;9.3

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;TransTexas
Common Stock&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Two Times Prime&#148; means two times the prime rate published by Citibank, N.A.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Written
Consent&#148;
has the meaning ascribed to it in Section&nbsp;2.2.


<P align="center" style="font-size: 10pt"><B>ARTICLE XI</B>



<DIV align="center" style="font-size: 10pt"><B>MISCELLANEOUS</B></DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 <U>Investigation</U>. It shall be no defense to an action for breach of this Agreement
that the Partnership or its agents have (or have not) made investigations into the affairs of the
Corporation or that the Corporation or Shareholder could not have known of the misrepresentation or
breach of warranty.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 <U>Survival of Representations and Warranties</U>. The representations and warranties
of the parties hereunder shall survive the Closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 <U>Entire Agreement</U>. This Agreement, including the schedules and exhibits hereto,
which are incorporated herein and made an integrated part hereof, constitutes the entire agreement
between the parties hereto and supersedes any and all prior discussions and agreements between the
parties relating to the subject matter hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4 <U>Waiver</U>. Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5 <U>Amendment</U>. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6 <U>No Third Party Beneficiary</U>. The terms and provisions of this Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns, and it is not the intention of the
parties to confer third party beneficiary rights upon any other Person, except that each
Indemnified Persons shall be a third party beneficiary of Article&nbsp;IX.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7 <U>Assignment; Binding Effect</U>. No party may assign this Agreement or any right,
interest or obligation hereunder without the prior written consent of the other Parties. This
Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8 <U>Headings</U>. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.

<P align="center" style="font-size: 10pt">28</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9 <U>Invalid Provisions</U>. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or obligations of any
party hereto under this Agreement will not be materially and adversely affected thereby, (a)&nbsp;such
provision will be fully severable, (b)&nbsp;this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof, and (c)&nbsp;the
remaining provisions of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance here from.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10 <U>Governing Law</U>. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the conflicts of laws principles
thereof, except as to matters relating to the internal affairs of the Partnership, the Shareholder
or the Corporation, which shall be governed by Delaware law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one and the
same instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12 <U>Waiver of Jury Trial</U>. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST ANY OTHER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR
THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. No party to
this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of, this Agreement or any related instruments or
the relationship between the parties. No party will seek to consolidate any such action in which a
jury trial has been waived with any other action in which a jury trial cannot be or has not been
waived. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13 <U>Consent to Jurisdiction</U>. Each party irrevocably submits to the exclusive
jurisdiction of any NY State Court in the County of New York or any courts of the United States of
America located in the Southern District of New York, and each party hereby agrees that all suits,
actions and proceedings brought by such party hereunder shall be brought in any such court. Each
party irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding brought in any
such court, any claim that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum and the right to object, with respect to any such suit, action or
proceeding brought in any such court, that such court does not have jurisdiction over such party or
the other party. In any such suit, action or proceeding, each party waives, to the fullest extent
it may effectively do so, personal service of any summons, complaint or other process and agrees
that the service thereof may be made by any means permitted by Section&nbsp;0 (other than facsimile
transmission). Each party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.


<P align="center" style="font-size: 10pt">29</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14 <U>Expenses</U>. All expenses, costs and fees in connection with the transactions
contemplated hereby (including fees and disbursements of counsel, consultants and accountants)
incurred by (a)&nbsp;Shareholder shall be paid and borne exclusively by Shareholder, and (b)&nbsp;the
Partnership shall be paid and borne exclusively by the Partnership. Notwithstanding the foregoing,
if this Agreement is terminated prior to the Closing and such termination results from any breach
by Shareholder or the Partnership, as the case may be, of any representation, warranty or covenant
by such party, then such breaching party shall reimburse the non-breaching party for all such
expenses, fees and cash, including for all expenses, fees and cash incurred in connection with
obtaining high yield or other financing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.15 <U>Notices</U>. All notices, request, demands and other communications hereunder shall
be in writing and shall be delivered personally, by certified or registered mail, return receipt
requested, and postage prepaid, by courier, or by facsimile transmission, addressed as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If to Shareholder:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">c/o Icahn Associates Corp.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">767 Fifth Avenue, Suite&nbsp;4700</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New York, NY 10153</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If to the Partnership:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">c/o American Real Estate Partners, L.P.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">100 South Bedford Rd.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mt. Kisco, NY 10549</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">With a copy to:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debevoise &#038; Plimpton LLP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">919 Third Avenue</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New York, NY 10022</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: William D. Regner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">or to such other address as a party may from time to time designate in writing in accordance with
this Section&nbsp;11.15. Each notice or other communication given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been received (a)&nbsp;on the Business Day
it is sent, if sent by personal delivery, (b)&nbsp;the earlier of receipt of three Business Days after
having been sent by certified or registered mail, return receipt
requested and postage prepaid, (c)on the Business Day it is sent, if sent by facsimile transmission and an activity report showing
the correct facsimile number of the party on whom notice is served and the correct number of pages
transmitted is obtained by the sender (provided, however, that such notice or other communication
is also sent by some other means permitted by this Section&nbsp;11.15, or (d)&nbsp;on the first Business Day
after sending, if sent by courier or overnight delivery.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.16 <U>Further Assurances</U>. Each of the parties hereto covenants and agrees that, from
time to time subsequent to Closing, it will, at the request of the other party, execute and deliver
all such documents, including, without limitation, all such additional conveyances, transfers,
consents and other assurances and do all such other acts and things as such other party may from

<P align="center" style="font-size: 10pt">30</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">time to time request be executed or done in order to better evidence, perfect or effect any
provision of this Agreement, or of any agreement or other document executed pursuant to this
Agreement, or any of the respective obligations intended to be created hereby or thereby.


<P align="center" style="font-size: 10pt"><B>&#091;Signature Page Follows&#093;</B>


<P align="center" style="font-size: 10pt">31</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
officer of each party hereto as of the date first above written.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Highcrest Investors Corp.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: <U>/s/ Jon Weber&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Jon Weber</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: Assistant Secretary</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>TransTexas Gas Corporation</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: <U>/s/ Bob G. Alexander&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Bob G. Alexander<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>National Onshore LP</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: Onshore GP LLC, its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" valign="top" align="left">By: AREP Oil &#038; Gas LLC, its sole member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: American Real Estate Holdings Limited Partnership, its</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">sole member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: American Property Investors, Inc., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: <U>/s/ Keith A. Meister&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Keith A. Meister<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: President and Chief Executive Officer</TD>
</TR>
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</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><B>&#091;Signature Page to
the TransTexas Merger Agreement &#151; Highcrest to AREP&#093;</B>


<P align="center" style="font-size: 10pt">32</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">GUARANTY: The undersigned hereby guarantees the payment and performance by National Onshore
LP of all of its duties and obligations under this Agreement when due.



<P align="left" style="font-size: 10pt"><B>American Real Estate Partners, L.P.</B>

<P align="left" style="font-size: 10pt">By: American Property Investors, Inc., its general partner



<P align="left" style="font-size: 10pt">By: <U>/s/ Keith A. Meister&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Name: Keith A. Meister<BR>
Title: President and Chief Executive Officer



<P align="left" style="font-size: 10pt">GUARANTY: The undersigned hereby guarantees the payment and performance by Highcrest
Investors Corp. of all of their duties and obligations under this Agreement when due.



<P align="left" style="font-size: 10pt"><B>BARBERRY CORP.</B>



<P align="left" style="font-size: 10pt">By: <U>/s/ Edward E.
Mattner&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Name: Edward E. Mattner<BR>
Title: Authorized Signatory


<P align="center" style="font-size: 10pt">&#091;Signature Page to the TransTexas Merger Agreement &#150; Highcrest to AREP&#093;


<P align="center" style="font-size: 10pt">33</DIV>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>y05076exv99w3.htm
<DESCRIPTION>EX-99.3: AGREEMENT AND PLAN OF MERGER
<TEXT>
<HTML>
<HEAD>
<TITLE>EXHIBIT 99.3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">EXHIBIT 99.3



<P align="center" style="font-size: 10pt">AGREEMENT AND PLAN OF MERGER



<P align="center" style="font-size: 10pt">Dated as of January&nbsp;21, 2005



<P align="center" style="font-size: 10pt">by and among



<P align="center" style="font-size: 10pt">National Offshore LP,



<P align="center" style="font-size: 10pt">Highcrest Investors Corp.,



<P align="center" style="font-size: 10pt">Arnos Corp.



<P align="center" style="font-size: 10pt">American Real Estate Partners, L.P.



<P align="center" style="font-size: 10pt">and



<P align="center" style="font-size: 10pt">Panaco, Inc.




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE I</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TERMS OF THE MERGER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Merger</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organizational Documents of Partnership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Officers of Partnership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effective Time</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions at the Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Treatment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE II</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES OF THE SELLERS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Shareholder</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consents and Approvals</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brokers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE III</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES  OF THE SELLERS RELATING TO THE CORPORATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization of Corporation; Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Adverse Effects or Changes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims Against Officers and Directors</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undisclosed Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Related Parties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Matters</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employees, Labor Matters, etc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Benefit Plans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.17</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.18</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Personal Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.19</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contracts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.20</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.21</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.22</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oil and Gas Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IV</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of the Partnership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE V</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Business Prior to Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Efforts to Consummate Transaction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Returns</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VI</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by the Shareholders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shareholders&#146; Certificates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Adverse Change</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Reserve Reports</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VII</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by the Partnership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Partnership&#146;s Certificate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approval</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Limited Partnership Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Good Standing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE VIII</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TERMINATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effect of Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IX</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">INDEMNIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnification by the Shareholders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Third Party Claims; Assumption of Defense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Settlement or Compromise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Failure of Indemnifying Person to Act</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Character</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DEFINITIONS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE XI</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations and Warranties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Third Party Beneficiary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment; Binding Effect</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalid Provisions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Jury Trial</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent to Jurisdiction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
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</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT AND PLAN OF MERGER (the or this &#147;Agreement&#148;) dated as of January&nbsp;21, 2005 is
made and entered into by and between National Offshore LP, a Delaware limited partnership (the
&#147;<U>Partnership</U>&#148; or after the Effective Time, the &#147;<U>Surviving Entity</U>&#148;), Highcrest
Investors Corp., a Delaware corporation (&#147;<U>Highcrest</U>&#148;), Arnos Corp., a Nevada Corporation
(&#147;Arnos&#148;) (each of Highcrest and Arnos being hereinafter referred to individually as a
&#147;<U>Shareholder</U>&#148; and collectively as the &#147;<U>Shareholders</U>&#148;), American Real Estate
Partners, L.P., a Delaware limited partnership (&#147;AREP&#148;), and Panaco, Inc., a Delaware corporation
(the &#147;<U>Corporation</U>&#148;). Capitalized terms not otherwise defined herein have the meanings set
forth in Article&nbsp;X.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Partnership is a limited partnership duly formed and validly existing under the
laws of the State of Delaware;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Corporation is a corporation duly organized and validly existing under the laws
of the State of Delaware;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Shareholders collectively own 100% of the outstanding common stock of the
Corporation, par value $.01 per share (the &#147;<U>Panaco Common Stock</U>&#148;);


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the General Corporation Law of Delaware, 8 <U>Del.</U> <U>C.</U> &#167;&#167; 101 <U>et</U>
<U>seq</U>. (the &#147;<U>GCL</U>&#148;), and the Delaware Revised Uniform Limited Partnership Act, 6
<U>Del.</U> <U>C.</U> &#167;&#167; 17-101 <U>et seq</U>. (the &#147;<U>LP Act</U>&#148;), each permits a
corporation organized and existing under the GCL to merge with and into a limited partnership
formed and existing under the LP Act; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the general partner and the limited partner of the Partnership and the board of
directors of the Corporation have duly authorized the merger of the Corporation with and into the
Partnership pursuant to the terms of this Agreement and each Shareholder&#146;s board of directors has
taken action authorizing the Shareholders to approve and adopt this Agreement as the sole
stockholders of the Corporation;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is agreed that, in accordance with the applicable statutes of the State of
Delaware, the Corporation shall be, at the Effective Time, merged with and into the Partnership
(the &#147;<U>Merger</U>&#148;), with the Partnership to be the Surviving Entity. The mode of carrying the
Merger into effect shall be as follows:


<P align="center" style="font-size: 10pt"><B>ARTICLE I<BR>
TERMS OF THE MERGER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 The Merger.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;At the Effective Time and subject to the terms and conditions set forth in this Agreement,
all of the Panaco Common Stock outstanding immediately prior to the Effective Time, by virtue of
the Merger and without any action on the part of the Shareholders, shall be canceled and converted
into the right to receive a number of depositary units representing limited
partnership interests of AREP to be determined in accordance with Section&nbsp;1.1(c) (the
&#147;<U>Merger Price</U>&#148;). Certificates representing the Merger Price shall be delivered by AREP to
the Shareholders upon surrender of the certificate(s) formerly representing the Panaco Common


<P align="center" style="font-size: 10pt">1
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<P align="left" style="font-size: 10pt">Stock. The shares of Panaco Common Stock converted into the right to receive the Merger Price are
hereinafter referred to collectively as the &#147;<U>Merger Shares</U>&#148;. All such Merger Shares, from
and after the Effective Time, shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and the Shareholders shall cease to have any rights with respect thereto,
except the right to receive the Merger Price therefor upon the surrender of such certificate(s) to
the Partnership.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;On or before the fifth Business Day prior to the anticipated Closing Date (the
&#147;<U>Closing Statement Date</U>&#148;), Shareholders will deliver to AREP (i)&nbsp;true and correct copies of
the 2004 Reserve Reports, and (ii)&nbsp;a statement (the &#147;<U>Closing Statement</U>&#148;), certified by an
officer of each Shareholder, setting forth



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A good faith estimate of the volume of any oil or natural gas imbalance owed by the
Corporation with respect to the Oil and Gas Interests as of December&nbsp;31, 2004 (collectively,
the &#147;<U>Imbalance</U>&#148;);



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A good faith estimate of the value of the Imbalance, net of royalties, taxes,
overriding royalties and other burdens (the &#147;<U>Imbalance Value</U>&#148;); and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a calculation of the Merger Price determined in accordance with Section&nbsp;1.1(c).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All statements, reports, materials and other supporting documentation delivered under this
Section&nbsp;1.1(b) shall be in form and content reasonably satisfactory to Buyer;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the Merger Price shall be 4,310,345 depositary units representing limited partnership
interests of AREP (&#147;<U>AREP Units</U>&#148;), provided that:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Merger Price shall be decreased by a number of AREP Units equal in value to the
Imbalance Value.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Adjusted Purchase Amount is less than $125&nbsp;million, the Merger Price shall
be decreased by a number of AREP Units equal in value to the amount of such difference,
<U>provided</U> that if the &#147;Adjusted Purchase Amount&#148; pursuant to the NEG Agreement
exceeds $329&nbsp;million and/or the &#147;Adjusted Purchase Amount&#148; pursuant to the TransTexas
Agreement exceeds $180&nbsp;million, the amount of such excess shall be applied to reduce the
reduction of the Merger Price hereunder except to the extent any such excess has been
applied to reduce the reduction of the &#147;Purchase Price&#148; pursuant to the NEG Agreement or the
&#147;Merger Price&#148; pursuant to the TransTexas Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this Section&nbsp;1.1(c), the value of an AREP Unit shall be $29.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;At the Effective Time, (i)&nbsp;the general partnership interest held by Offshore GP LLC, a
Delaware limited liability company (the &#147;<U>General Partner</U>&#148;), and the limited partnership
interest held by Offshore LP LLC, a Delaware limited liability company (the &#147;<U>Limited
Partner</U>&#148;), immediately prior to the Effective Time shall remain outstanding, (ii)&nbsp;the General
Partner and the Limited Partner shall continue as the general partner and limited partner,
respectively, of the
Surviving Entity and (iii)&nbsp;100% of the membership interests in each of the General Partner and
the Limited Partner (the &#147;Interests&#148;) shall be owned by AREP. Immediately following the Effective
Time, (i)&nbsp;AREP shall contribute 100% of the Interests to American Real Estate Holdings Limited


<P align="center" style="font-size: 10pt">2
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<P align="left" style="font-size: 10pt">Partnership, a Delaware limited partnership (&#147;AREH&#148;), and (ii)&nbsp;AREH shall contribute 100% of the
Interests to AREP Oil &#038; Gas LLC, a Delaware limited liability company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Organizational Documents of Partnership</U>. From and after the Effective Time, and until
thereafter amended as provided by law, the Certificate of Limited Partnership and Limited
Partnership Agreement of the Partnership as in effect immediately prior to the Effective Time shall
be the Certificate of Limited Partnership and Limited Partnership Agreement of the Surviving
Entity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Officers of Partnership</U>. From and after the Effective Time, and until their
successors are duly elected or appointed, or until their earlier death, resignation or removal, the
partners and officers of the Surviving Entity shall be the same as the partners and officers of the
Partnership immediately prior to the Effective Time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Effective Time</U>. A certificate of merger to effect the Merger (&#147;<U>Certificate of
Merger</U>&#148;) shall be filed on the Closing Date (as hereinafter defined) with the Secretary of
State of the State of Delaware (&#147;<U>Secretary of State</U>&#148;) pursuant to the GCL and the LP Act
and shall specify that the Merger shall become effective upon the filing of the Certificate of
Merger (such time of effectiveness, the &#147;<U>Effective Time</U>&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Closing</U>. Upon the terms and subject to the conditions of this Agreement, the closing
of the transactions contemplated hereby (the &#147;<U>Closing</U>&#148;) shall take place (a)&nbsp;at the offices
of the Partnership, located at 100 South Bedford Road, Mt. Kisco, NY at 10:00 a. m., local time, on
the second business day immediately following the day on which the last to be satisfied or waived
of the conditions set forth in Articles VI and VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived in accordance herewith or (b)&nbsp;at such other time, date or
place as the Corporation and the Partnership may agree. The date on which the Closing occurs is
herein referred to as the &#147;<U>Closing Date</U>.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Actions at the Closing</U>. At the Closing: (i)&nbsp;the Shareholders shall deliver to the
Partnership one or more certificates representing the Panaco Common Stock; (ii)&nbsp;the Partnership
shall deliver to the Shareholders the Merger Price and the certificate described in Section&nbsp;7.3;
(iii)&nbsp;each Shareholder shall deliver or cause to be delivered to the Partnership the certificate
described in Section&nbsp;6.3; and (iv)&nbsp;the Shareholders and Partnership shall cause the Certificate of
Merger to be filed as provided in Section&nbsp;1.4 hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Tax Treatment</U>. The Shareholders and AREP agree and acknowledge that the transfer
of the Corporation&#146;s assets pursuant to the Merger and the Shareholder&#146;s receipt of the Merger
Price qualify for nonrecognition treatment under Section 721(a) of the Internal Revenue Code of
1986, as amended.


<P align="center" style="font-size: 10pt"><B>ARTICLE II</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES OF THE SELLERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to the Partnership to enter into this Agreement, each Shareholder hereby
makes the following representations and warranties to the Partnership:


<P align="center" style="font-size: 10pt">3
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Organization of Shareholder</U>. Highcrest is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Arnos is a corporation
duly organized, validly existing and in good standing under the Laws of the State of Nevada. Each
Shareholder has full organizational power and authority to execute and deliver this Agreement and
to perform its obligations hereunder and to consummate the transactions contemplated hereby,
including without limitation, to sell and transfer (pursuant to this Agreement) the Panaco Common
Stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Authority</U>. The execution and delivery by each Shareholder of this Agreement, and
the performance by such Shareholder of its obligations hereunder, have been duly and validly
authorized by such Shareholder&#146;s board of directors and stockholders and no other action on the
part of such Shareholder, its board of directors or stockholders is necessary for such execution,
delivery or performance. This Agreement has been duly and validly executed and delivered by each
Shareholder and constitutes a legal, valid and binding obligation of such Shareholder, enforceable
against such Shareholder in accordance with its terms. Each Shareholder&#146;s board of directors has
authorized its officers to execute and deliver to the Corporation a unanimous written consent of
the Shareholders, as the sole stockholders of the Corporation, approving and adopting this
Agreement (&#147;<U>Written Consent</U>&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Title</U>. The delivery of the Panaco Common Stock and other instruments of transfer
delivered by the Shareholders to the Partnership at the Closing will transfer to the Partnership
good and valid title to the Panaco Common Stock, free and clear of all Liens.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>No Conflicts</U>. The execution and delivery by each Shareholder of this Agreement do
not, and the performance by such Shareholder of its obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with or result in a violation or breach of any of the terms, conditions or
provisions of the organizational documents of such Shareholder or the Corporation;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with or result in a violation or breach of any term or provision of any Law or
Order applicable to such Shareholder or the Corporation or any of the Assets and Properties of
Shareholder or the Corporation; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Shareholder or the Corporation to
obtain any consent, approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv)&nbsp;result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or
imposition of any Lien upon Shareholders or the Corporation or any of the Assets and Properties of
Shareholders or the Corporation under, any Contract or License to which such Shareholder is a party
or by which any of its Assets and Properties is bound.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Consents and Approvals</U>. Except for (i)&nbsp;the approval of depositary unit holders of
the Purchaser required by the New York Stock Exchange, and (ii)&nbsp;approvals to amend the Purchaser&#146;s
amended and restated agreement of limited partnership, dated as of May&nbsp;12, 1987, as amended, as
contemplated by Section&nbsp;7.7 hereof, no consent, authorization or approval of, filing or
registration with, or cooperation from, any Governmental Authority or any other Person not a party
to this Agreement is necessary in connection with the execution, delivery and performance


<P align="center" style="font-size: 10pt">4
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<P align="left" style="font-size: 10pt">by the
Shareholders of this Agreement or the consummation of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Brokers</U>. Neither the Shareholders nor the Corporation has used any broker or
finder in connection with the transactions contemplated hereby, and neither the Partnership nor any
Affiliate of the Partnership has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder&#146;s fee or other commission of any
Person retained or purporting to be retained by the Shareholders or by the Corporation in
connection with any of the transactions contemplated by this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Corporation or the Shareholders to the Partnership or any representative or Affiliate
of the Partnership in connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.


<P align="center" style="font-size: 10pt"><B>ARTICLE III</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES<BR>
OF THE SELLERS RELATING TO THE CORPORATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to the Partnership to enter into this Agreement, each Shareholder hereby
makes the following representations to the Partnership, except as set forth in the Disclosure
Schedule attached to this Agreement (it being agreed that any exceptions to such representations
and warranties shall clearly identify the sections of this Agreement to which they apply).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Due Organization of Corporation; Authority</U>. (a) (a)&nbsp;The Corporation is duly
organized and validly existing under the laws of the state of Delaware, with all requisite power
and authority to own, lease and operate its properties and to carry on its business as they are now
being owned, leased, operated and conducted. Except for the State of Delaware, the Corporation is
licensed or qualified to do business and is in good standing (where the concept of &#147;good standing&#148;
is applicable) as a foreign corporation in each jurisdiction where the nature of the properties
owned, leased or operated by it and the business transacted by it require such licensing or
qualification.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Shareholders have delivered to the Partnership true, correct and complete copies of
the organizational documents of the Corporation, which organizational documents are in full force
and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Corporation&#146;s board of directors has duly authorized and approved this Agreement and,
subject to the due execution and delivery of the Written Consent by the Shareholders, this
Agreement has been duly authorized by the Corporation by all necessary corporate action.



<P align="center" style="font-size: 10pt">5
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Capitalization</U>. Immediately prior to the Closing, the Shareholders will own the
Panaco Common Stock, free and clear of all Liens. No Person holds any option, warrant, convertible
security or other right to acquire any interest in the Corporation. There are no obligations,
contingent or otherwise, of the Corporation to repurchase, redeem or otherwise acquire any
ownership interests of the Corporation or to provide funds to or make any material investment (in
the form of a loan, capital contribution or otherwise) in any Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Subsidiaries</U>. The Corporation has no subsidiaries. The Corporation does not own,
directly or indirectly, any ownership or other investment interest, either of record, beneficially
or equitably, in any Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Financial Statements</U>. (a)&nbsp;The Shareholders have delivered to the Partnership true, correct and complete copies of the
Audited Financial Statements. The Audited Financial Statements have been prepared in accordance
with GAAP consistently applied and present fairly the financial position, assets, liabilities and
retained earnings of the respective companies as of the dates thereof and the revenues, expenses,
results of operations, and cash flows of the respective companies for the periods covered thereby.
The Audited Financial Statements are in accordance with the books and records of the respective
companies, do not reflect any transactions which are not bona fide transactions and do not contain
any untrue statement of a material fact (whether or not required to be disclosed under GAAP) or
omit to state any material fact necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Shareholders have delivered to the Partnership true and complete copies of the Interim
2004 Financial Statements. The Interim 2004 Financial Statements present fairly the financial
position, assets, liabilities and retained earnings of the respective companies as of the dates
thereof and the revenues, expenses, results of operations, and cash flows of the respective
companies for the periods covered thereby. The Interim 2004 Financial Statements are in accordance
with the books and records of the respective companies, do not reflect any transactions which are
not bona fide transactions and do not contain any untrue statement of a material fact (whether or
not required to be disclosed under GAAP) or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances in which they were made, not
misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>No Adverse Effects or Changes</U>. Since December&nbsp;31, 2003, (i)&nbsp;the Corporation has
not suffered any Material Adverse Effect; (ii)&nbsp;there has been no change, event, development, damage
or circumstance affecting the Corporation that, individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect on the Corporation; (iii)&nbsp;there has not been any
change by the Corporation in its accounting methods, principles or practices, or any revaluation by
the Corporation of any of its assets, including writing down the value of inventory or writing off
notes or accounts receivable; and (iv)&nbsp;the Corporation has conducted its business only in the
ordinary course of business consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 <U>Title to Properties</U>. The Corporation has good and marketable title to, and the
Corporation is the lawful owner of, all of the tangible and intangible assets, properties and
rights used in connection with its business and all of the tangible and intangible assets,
properties and rights reflected in the Financial Statements, except for changes accruing in the
ordinary course of business that would not, individually or in the aggregate, adversely affect the
ability of the Corporation to conduct its business in the ordinary course, consistent with past
practice.


<P align="center" style="font-size: 10pt">6
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <U>Litigation</U>. Except as disclosed in the Financial Statements, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations, with such exceptions as are individually, or in the aggregate, not
material in nature or amount, pending or, to the Knowledge of the Shareholders, threatened against
or affecting the Corporation or any of its officers, directors, employees or agents in their
capacity as such, or any of the Corporation&#146;s Assets and Properties or business of the Corporation,
and to the Shareholders&#146;, there are no facts or circumstances which may give rise to any of the foregoing. Except as disclosed in the
Financial Statements, the Corporation is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 <U>Claims Against Officers and Directors</U>. There are no pending or, to the
Shareholders&#146; Knowledge, threatened claims against any director, officer, employee or agent of the
Corporation or any other Person, which could give rise to any claim for indemnification against the
Corporation or cause the Corporation to incur any material liability or otherwise suffer or incur
any material Loss.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 <U>Insurance</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation maintains insurance policies that provide adequate and suitable insurance
coverage for the business of the Corporation and are on such terms, cover such risks and are in
such amounts as the insurance customarily carried by comparable companies of established reputation
similarly situated and carrying on the same or similar business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, the Shareholders have delivered to the Partnership all insurance
policies (including policies providing property, casualty, liability, workers&#146; compensation, and
bond and surety arrangements) under which the Corporation is an insured, a named insured or
otherwise the principal beneficiary of coverage. All insurance policies of the Corporation are in
full force and effect. The Corporation has not received notice of any refusal of coverage with
respect to an existing policy. The Corporation has paid all premiums due under all such policies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <U>Compliance with Law</U>. Except as set forth in the Financial Statements, the
Corporation is in compliance and, at all times, have been in compliance in all respects with all
applicable Laws relating to the Corporation or its Assets and Properties or business. Except as
disclosed in the Financial Statements, no investigation or review by any Governmental or Regulatory
Authority or self-regulatory authority is pending or, to the Shareholders&#146; Knowledge, threatened,
nor has any such authority indicated orally or in writing to the Shareholders or the Corporation an
intention to conduct an investigation or review of the Corporation or, with respect to the
Corporation or the Shareholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <U>Undisclosed Liabilities</U>. Except as disclosed in the Financial Statements, the
Corporation has no material liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due, other than liabilities
and obligations incurred after September&nbsp;30, 2004 in the ordinary course of business consistent
with past practice (including as to amount and nature).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12 <U>Related Parties</U>. Except for the Management Agreement with National Energy Group Inc. and the term loan with Mid
River LLC (the &#147;Panaco Note&#148;), and except as set forth


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">on Schedule&nbsp;3.12 or as otherwise disclosed
in the Financial Statements, (i)&nbsp;no Affiliate of the Corporation is a party to any Contract with
the Corporation; (ii)&nbsp;no Affiliate of the Corporation owes any material amount of money to, nor is
such Affiliate owed any material amount of money by, the Corporation, (iii)&nbsp;the Corporation does
not have, directly or indirectly, guaranteed or assumed any indebtedness for borrowed money or
otherwise for the benefit of an Affiliate of the Corporation; and (iv)&nbsp;the Corporation has not made
any material payment to, or engaged in any material transaction with, an Affiliate of the
Corporation.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13 <U>Intellectual Property</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation owns, or possesses adequate rights to use, all material patents, trade
names, trademarks, copyrights, inventions, processes, designs, formulae, trade secrets, know-how,
seismic data and other intellectual property rights necessary for, used or held for use in the
conduct of its business. All material intellectual property necessary for used or held for use in
the conduct of the business of the Corporation has been duly registered with, filed in or issued by
the relevant filing offices, domestic or foreign, to the extent necessary or desirable to ensure
full protection under any applicable Law, and such registrations, filings or issuances remain in
full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The conduct of the business of the Corporation does not infringe or otherwise conflict
with any rights of any Person in respect of intellectual property rights. None of the intellectual
property rights owned by the Corporation is being infringed or otherwise, in any way, used or
available for use by any Person without a license or permission from the Corporation and the
Corporation has not taken or omitted to take any action which would have the effect of waiving any
of its rights thereunder. The Corporation has not received any claim of infringement or conflict
by any third party in respect of any intellectual property used by the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.14 <U>Environmental Matters</U>. Except as set forth on Schedule&nbsp;3.14 or in the Financial
Statements:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation has obtained all material Environmental Permits that are required with
respect to its Assets and Properties and businesses, either owned or leased;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Corporation and its Assets and Properties and businesses, are and have been in
compliance in all material respects with all terms and conditions of all applicable Environmental
Laws and Environmental Permits;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no Environmental Claims pending or, to the Knowledge of the Shareholders,
threatened against the Corporation. The Corporation has not received any notice from any
Governmental or Regulatory Authority or any person of any violation or liability arising under any
Environmental Law or Environmental Permit in connection with its Assets and Properties, business or
operations;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the Corporation nor any other Person has caused or taken any action that will
result in any material liability, obligation or cost on the part of the Corporation relating to (x)
environmental conditions on, above, under or from any properties or assets currently or formerly owned, leased, operated or used by the Corporation, or (y)&nbsp;the past or present use,


<P align="center" style="font-size: 10pt">8
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">management, transport, treatment, generation, storage, disposal, release or threatened release of
Hazardous Materials.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The Corporation does not own, lease or operate and has not owned, leased or operated, any
property listed on the National Priorities List pursuant to CERCLA or on the CERCLIS or on any
other federal or state list as sites requiring investigation or cleanup;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The Corporation is not transporting, has not transported, and is not arranging for the
transportation of, any Hazardous Material to any location which is listed on the National
Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state list or
which is the subject of federal, state or local enforcement actions or other investigations that
may lead to material claims against the Corporation for investigative or remedial work, damage to
natural resources, property damage or personal injury including claims under CERCLA;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;There are no sites, locations or operations at which the Corporation is currently
undertaking, or has completed, any investigative, remedial, response or corrective action as
required by Environmental Laws;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;There are no physical or environmental conditions existing on any property owned or leased
by the Corporation resulting from its operations or activities, past or present, at any location,
that would give rise to any material on-site or off-site investigative or remedial obligations or
any corrective action under any applicable Environmental Laws; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Shareholders have provided to the Partnership all material environmental site
assessments, audits, investigations and studies in its possession, custody or control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.15 <U>Employees, Labor Matters, etc</U>. Except as set forth in the Financial Statements,
the Corporation is not a party to or bound by, and none of its employees is subject to, any
collective bargaining agreement, and there are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees employed by the Corporation.
There has not occurred or been threatened any material strike, slow down, picketing, work stoppage,
concerted refusal to work overtime or other similar labor activity with respect to any employees of
the Corporation. There are no labor disputes currently subject to any grievance procedure,
arbitration or litigation and there is no representation petition pending or threatened with
respect to any employee of the Corporation. The Corporation has complied with all applicable Laws
pertaining to the employment or termination of employment of their respective employees, including,
without limitation, all such Laws relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination or distinction and other similar employment
activities; except for any failure to comply that, individually and in the aggregate, is not
reasonably likely to result in any Material Adverse Effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.16 <U>Employee Benefit Plans</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as set forth in the Financial Statements or accrued thereafter in accordance with
the terms of the Plans as of the date hereof, the Corporation has not incurred any material liability, and no event, transaction or condition has occurred or exists that could
result in any material liability, on account of any Plans, including but not limited to liability
for (i)&nbsp;additional contributions required to be made under the terms of any Plan or its related
trust,

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">insurance contract or other funding arrangement with respect to periods ending on or prior
to the date hereof which are not reflected, reserved against or accrued in the Financial
Statements; (ii)&nbsp;breaches by the Corporation or any of its employees, officers, directors,
stockholders, or, to the Knowledge of the Shareholders, the trustees under the trusts created under
the Plans, or any other Persons under ERISA or any other applicable Law; or (iii)&nbsp;income taxes by
reason of non-qualification of the Plans. Each of the Plans has been operated and administered in
all material respects in compliance with its terms, all applicable Laws and all applicable
collective bargaining agreements. Since September&nbsp;30, 2004, the Corporation has not communicated
to any current or former director, officer, employee or consultant thereof any intention or
commitment to amend or modify any Plan, or to establish or implement any other employee or retiree
benefit or compensation plan or arrangement, which would materially increase the cost to the
Corporation.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Each Plan which is intended to be &#147;qualified&#148; within the meaning of section 401(a) of the
Code, and the trust (if any) forming a part thereof has received a favorable determination letter
or is covered by an opinion letter from the Internal Revenue Service and no event has occurred and
no condition exists which could reasonably be expected to result in the revocation of any such
determination. All amendments and actions required to bring each Plan into conformity with the
applicable provisions of ERISA, the Code, and any other applicable Laws have been made or taken.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no pending or threatened claims (and no facts or circumstances exist that could
give rise to any such claims) by or on behalf of any participant in any of the Plans, or otherwise
involving any such Plan or the assets of any Plan, other than routine claims for benefits in the
ordinary course. The Plans are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of Labor, or any other
Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;None of the Plans provides benefits of any kind with respect to current or former
employees, officers, or directors (or their beneficiaries) of the Corporation beyond their
retirement or other termination of employment, other than (<U>i</U>) coverage for benefits
mandated by Section&nbsp;4980B or the Code, (<U>ii</U>) death benefits or retirement benefits under an
employee pension benefit plan (as defined by section 3(2) of ERISA), or (<U>iii</U>) benefits, the
full cost of which is borne by such current or former employees, officers, directors, or
beneficiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;No Plan sponsored by the Corporation is a &#147;multiemployer plan&#148; within the meaning of
Section&nbsp;4001(a)(3) of ERISA or a &#147;multiple employer plan&#148; as addressed in section 4063 or 4064 of
ERISA. No Plan sponsored by the Corporation is subject to Title IV of ERISA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The consummation of the transactions contemplated by this Agreement will not (alone or in
combination with any other event, including, without limitation, the passage of time) result in (i)
any payment (including, without limitation, severance, unemployment compensation, golden parachute,
bonus payments or otherwise) becoming due under any agreement or oral arrangement to any current or
former director, officer, employee or consultant of the Corporation, (ii)&nbsp;any increase in the
amount of salary, wages or other benefits payable to any director, officer, employee or consultant
of the Corporation, or (iii)&nbsp;any acceleration of the vesting or timing of payment of any benefits or compensation (including, without limitation,
any increased or accelerated funding obligation) payable to any director, officer, employee or
consultant of the Corporation.




<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.17 <U>Real Property</U>. Schedule&nbsp;3.17 contains a legal description of each parcel of real
property, leases in real property, or other interests in real property, (including the address
thereof) and a legal description of each parcel in which the Corporation holds a valid easement to
use such parcel (the &#147;Real Property&#148;). The Corporation has Good and Defensible Title to, or a
valid and subsisting leasehold estate, or easement, in each such parcel of Real Property, free and
clear of all Liens other than Permitted Encumbrances. All of the real property leases in the Real
Property are valid, binding, and enforceable in accordance with their terms, and are in full force
and effect.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.18 <U>Tangible Personal Property</U>. The Corporation is in possession of and has good
title to, or have valid leasehold interests in or valid rights under contract to use, all of the
real and personal property used or held for use in the business of the Corporation, including the
interest of the Corporation in all wells, well and leasehold equipment, pipelines, platforms,
facilities, improvements, goods and other personal property located on or used in connection with
the Real Property (the &#147;Fixtures and Equipment&#148;). All the Fixtures and Equipment is in good
working order and condition, ordinary wear and tear excepted, and its use complies in all material
respects with all applicable Laws. All of the Fixtures and Equipment is adequate for the uses to
which they are being put and are sufficient for the conduct of the business of the Corporation in
the manner as conducted prior to the Closing. The Corporation owns all of the Fixtures and
Equipment free and clear of all Liens except the Permitted Encumbrances.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.19 <U>Contracts</U>. (a)&nbsp;Schedules 3.19 and 3.17 contains a true and complete list of each
of the following Contracts as of the date hereof:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all Contracts providing for a commitment of employment or consultation services for
a specified term and payments at any one time or in any one year in excess of $100,000;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all Contracts with any Person containing any provision or covenant prohibiting or
materially limiting the ability the Corporation to engage in any business activity or
compete with any Person;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) all Contracts relating to indebtedness of the Corporation, other than the Panaco
Note;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all Contracts (other than this Agreement) providing for (i)&nbsp;the disposition or
acquisition of any assets or properties that individually or in the aggregate are material
to the business of the Corporation or that contain continuing obligations of the
Corporation, or (ii)&nbsp;any merger or other business combination involving the Corporation;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all Contracts (other than this Agreement) that limit or contain restrictions on the
ability of the Corporation to incur indebtedness or incur or suffer to exist any Lien, to purchase or sell any assets, to change the lines of business in which it
participates or engages or to engage in any merger or other business combination;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) all Contracts establishing any joint venture, strategic alliance or other
collaboration;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) all Contracts with any Person obligating the Corporation to guarantee or
otherwise become directly or indirectly obligated with respect to any liability or

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left:3%; font-size: 10pt">obligation in excess of $25,000 in each case or $100,000 in the aggregate at any one time
outstanding;

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) all Contracts for the leasing of real property by the Corporation setting forth
the address, landlord and tenant for each lease; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) all other Contracts that (i)&nbsp;involve the payment, pursuant to the terms of any
such Contract, by or to the Corporation of more than $100,000 annually, (ii)&nbsp;cannot be
terminated within 90&nbsp;days after giving notice of termination without resulting in any
material cost or penalty to the Corporation, or (iii)&nbsp;are material to the business of the
Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, true, correct and complete copies of each Contract required to
be disclosed in Schedule&nbsp;3.19 have been delivered to, or made available for inspection by, the
Partnership. Each such Contract is in full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms, of the Corporation and, of each other
party thereto; and neither the Corporation nor, to the Knowledge of the Shareholders, any other
party to such Contract, is in violation or breach of or default under any such Contract (or with
notice or lapse of time or both, would be in violation or breach of or default under any such
Contract). All conditions necessary to maintain the Contracts in force have been duly performed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.20 <U>Tax</U>. (a)&nbsp;The Corporation has duly and timely filed with the appropriate taxing
authorities all material federal, state and local income Tax Returns and all other material Tax
Returns required to be filed through the date hereof and will duly and timely file any such returns
required to be filed on or prior to the Closing. Such Tax Returns and other information filed are
(and, to the extent they will be filed prior to the Closing, will be) complete and accurate in all
material respects. The Corporation does not have pending any request for an extension of time
within which to file federal, state or local income Tax Returns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All Taxes of the Corporation in respect of periods (or portions thereof) ending at or
prior to the Closing have been paid by the Corporation or such Taxes (other than income Taxes) are
shown as due and payable after the Closing on the Financial Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;No federal, state, local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any material Taxes or material Tax Returns of the
Corporation. The Corporation has not received a written notice of any such pending audits or
proceedings. There are no outstanding waivers extending the statutory period of limitation
relating to the payment of Taxes due from the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the IRS nor any other taxing authority (whether domestic or foreign) has asserted
in writing, or to the best Knowledge of the Corporation, is threatening to assert, against the
Corporation any material deficiency or material claim for Taxes in excess of the reserves
established therefor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;There are no Liens for Taxes upon any property or assets of the Corporation, except for
Liens for Taxes not yet due and payable and liens for Taxes that are being contested in good faith
by appropriate proceedings as set forth on Schedule&nbsp;3.20(e) and as to which adequate reserves have
been established in accordance with GAAP.



<P align="center" style="font-size: 10pt">12
</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The Corporation has no obligation under any Tax sharing agreement or similar arrangement
with any other Person with respect to Taxes of such other Person.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.21 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Corporation or the Shareholders to the Partnership or any representative or Affiliate
of the Partnership in connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.22 <U>Oil and Gas Properties</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Corporation has Good and Defensible Title to all Oil and Gas Properties.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;To the Knowledge of Shareholder (i)&nbsp;all of the Wells of the Corporation have been drilled
and completed within the boundaries of the Oil and Gas properties of the Corporation or within the
limits otherwise permitted by Contract, and by applicable Laws; and (ii)&nbsp;all drilling and
completion of such Wells and all operations with respect thereto have been conducted in compliance
with all applicable Laws, except such violations that would not or could not reasonably be expected
to have a Material Adverse Effect on the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Corporation has all material Licenses necessary for, used or held for use in the
conduct of its businesses.


<P align="center" style="font-size: 10pt"><B>ARTICLE IV<BR>
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Partnership hereby represents and warrants to each Shareholder as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Organization of the Partnership</U>. The Partnership is a limited partnership duly
formed, validly existing and in good standing under the Laws of the State of Delaware. The
Partnership has full organizational power and authority to execute and deliver this Agreement and
to perform the Partnership&#146;s obligations hereunder and to consummate the transactions contemplated hereby, including without limitation
to merge with the Corporation pursuant to this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Authority</U>. The execution and delivery by the Partnership of this Agreement, and
the performance by the Partnership of its obligations hereunder, have been duly and validly
authorized and, no other partnership action on the part of the Partnership or its partners is
necessary. This Agreement has been duly and validly executed and delivered by the Partnership and
constitutes a legal, valid and binding obligation of the Partnership enforceable against the
Partnership in accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>No Conflicts</U>. The execution and delivery by the Partnership of this Agreement do
not, and the performance by the Partnership of its obligations under this Agreement and the
consummation of the transactions contemplated hereby, will not:




<P align="center" style="font-size: 10pt">13
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with, or result in a violation or breach of, any of the terms, conditions or
provisions of the organizational documents of the Partnership;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with, or result in a violation or breach of, any term or provision of any Law or
Order applicable to the Partnership or any of its Assets and
Properties (other than such conflicts,
violations or breaches which will not have a Material Adverse Effect on the Partnership); or



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;(i)&nbsp;conflict with, or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require the Partnership to obtain any
consent, approval or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (iv)&nbsp;result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or imposition of
any Lien upon the Partnership or any of its Assets and Properties under, any Contract or License to
which the Partnership is a party or by which any of its Assets and Properties is bound.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Capitalization</U>. The AREP Units have been duly authorized by all required action
on the part of AREP; the AREP Units, when issued and paid for in accordance with the Agreement,
will be validly issued, fully paid and nonassessable, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through AREP, except as expressly set
forth in the Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE V<BR><BR>
COVENANTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance of Business Prior to Closing</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Shareholders shall cause the Corporation from the date hereof through the Closing Date
to:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) conduct its operations and business according to their usual, regular and ordinary
course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) use all commercially reasonable efforts to keep its business and properties
substantially intact, including its present operation, physical facilities, working
conditions, insurance policies, and relationships with lessors, licensors, suppliers,
customers, employees;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) maintain its corporate existence;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) maintain its books and records and accounts in its usual, regular, and ordinary
manner in compliance with all applicable laws and governmental orders;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) pay and discharge when due all taxes, assessments and governmental charges imposed
upon it or any of its properties, or upon the income or project therefrom in the ordinary
course of business consistent with past practice;





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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) promptly notify the Partnership of any Material Adverse Change to the Corporation;
and

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) permit representatives of the Partnership to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business operations of the
Corporation, to all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the generality of the foregoing, from the date hereof through the
Closing, the Shareholders shall not and shall cause the Corporation not to:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) engage in any transaction, or take or omit to take any action, that would result in
a breach of any representation or warranty in Article&nbsp;II and III of this Agreement;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) declare, set aside, or pay any dividend;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) declare or pay any increase in compensation to any officer, director, employee or
agent of the Corporation, except in the ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) enter into any Contract that, had it been in effect on the date hereof, would have
been required to be listed on Schedule&nbsp;3.19, except for those Contracts entered into in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) permit, allow or suffer any of its properties, assets or rights to be subject to
any Lien other than Permitted Encumbrances;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) incur any long-term indebtedness;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) make any material capital expenditure or commitment, other than for emergency
repairs or replacement, except for those capital expenditures or commitments made in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) terminate, materially modify, assign, or materially amend any Contract required
to be listed on Schedule&nbsp;3.19, except in the ordinary course consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Efforts to Consummate Transaction</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;From the date hereof through the Closing Date, upon the terms and subject to the
conditions set forth in this Agreement, each of the parties shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. The parties will use their
commercially reasonable efforts and cooperate with one another (i)&nbsp;in promptly determining whether
any filings are required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would result in a Material
Adverse Effect on the Corporation or an event of default, termination or



<P align="center" style="font-size: 10pt">15
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">acceleration of any
agreement or any put right under any agreement) under any applicable Law or regulation or from any
Governmental or Regulatory Authority or third parties, and (ii)&nbsp;in promptly making any such
filings, in furnishing information required in connection therewith and in timely seeking to obtain
any such consents, approvals, permits or authorizations. For purposes of this Section&nbsp;5.2, the
Shareholders shall not be obligated to make any payment to any third party as a condition to
obtaining such party&#146;s consent or approval, other than for required filing fees.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;As promptly as practicable following the date hereof: (i)&nbsp;AREP shall take all action
necessary to call, give notice of and hold a meeting (the &#147;Meeting&#148;) of the holders of AREP Units
to vote on the matters described in Sections&nbsp;7.5 and 7.7 hereof (the &#147;Proposals&#148;); and (ii)&nbsp;AREP
shall prepare and file with the United States Securities and Exchange Commission (the &#147;SEC&#148;) a
proxy or information statement (the &#147;Statement&#148;) of AREP to be sent to the holders of AREP Units in
connection with the Meeting. AREP shall use commercially reasonable efforts to cause the Statement
to comply with the rules and regulations promulgated by the SEC and to respond promptly to any
comments of the SEC or its staff. Each of such Proposals, and all Statements and other documents
relating thereto, shall be in form and substance reasonably acceptable to AREP, Shareholder,
Barberry Corp. and High Coast Limited Partnership. Each of Barberry Corp. and High Coast Limited
Partnership hereby agrees to vote all of its AREP Units in favor of the Proposals at the Meeting.
Notwithstanding the foregoing, to the extent practicable, the parties shall take all necessary and
appropriate action to cause the Proposals to be approved without a meeting of the holders of AREP
Units in accordance with applicable law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;From the date hereof through the Closing Date, the Shareholders shall give prompt written
notice to the Partnership of: (i)&nbsp;any occurrence, or failure to occur, of any event which
occurrence or the failure would reasonably be expected to cause any representation or warranty of
the Shareholders contained in this Agreement, if made on or as of the date of such event or as of the Closing Date, to be untrue or inaccurate, except for changes permitted by
this Agreement and except to the extent that any representation and warranty is made as of a
specified date, in which case, such representation and warranty shall be true, complete and
accurate as of such date; or (ii)&nbsp;any failure of the Shareholders, the Corporation or any officer,
general partner, director, employee, consultant or agent of the Shareholders or the Corporation, to
comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
or them under this Agreement; provided, however, that no such notification shall affect the
representations or warranties of the Shareholders or the conditions to the obligations of the
Partnership hereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Shareholders shall take all actions required, at Shareholder&#146;s expense, to cause the
Corporation to be in good standing in the state of Delaware as soon as possible after the date
hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Tax Returns</U>. The Shareholders shall be responsible for filing the Tax Returns of
the Corporation for all periods ending on or before the Effective Time and shall have sole control
over the preparation and filing of such Tax Returns (including, the right to make any Tax
election).


<P align="center" style="font-size: 10pt">16
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<P align="center" style="font-size: 10pt"><B>ARTICLE VI</B>



<P align="center" style="font-size: 10pt"><B>CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Partnership under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of the Shareholders contained herein shall have been accurate, true
and correct on and as of the date of this Agreement, and shall also be accurate, true and correct
in all material respects on and as of the Closing Date with the same force and effect as though
made by the Shareholders on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Compliance by the Shareholders</U>. Each Shareholder shall have duly performed and
complied with all of its covenants, obligations and agreements contained in this Agreement to be
performed and complied with by such Shareholder on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Shareholders&#146; Certificates</U>. The Partnership shall have received a certificate
dated as of the Closing Date executed by an authorized officer of each Shareholder certifying as to
the fulfillment and satisfaction of the conditions set forth in Sections&nbsp;6.1 and 6.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>No Material Adverse Change</U>. No Material Adverse Change to the Corporation shall have occurred and no event shall have
occurred which, in the reasonable judgment of the Partnership, is reasonably likely to have a
Material Adverse Effect on the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the
Corporation, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is reasonably likely
to result in substantial damages in respect of, any provision of the Agreement or the consummation
of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Reserve Reports</U>. AREP shall have received the 2004 Reserve Reports.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Registration Rights Agreement</U>. AREP shall have executed and delivered the
Registration Rights Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE VII<BR>
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Shareholders under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of the Partnership contained herein shall have been accurate, true
and correct on and as of the date of this Agreement, and shall also be accurate, true and correct
in all material respects on and as of the Closing Date with the same force and effect as though
made by the Partnership on and as of the Closing Date.


<P align="center" style="font-size: 10pt">17
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Compliance by the Partnership</U>. The Partnership shall have duly performed and
complied with its respective covenants, obligations and agreements contained in this Agreement to
be performed and complied with by the Partnership on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>The Partnership&#146;s Certificate</U>. The Shareholders shall have received a certificate
dated as of the Closing Date executed by an authorized officer of the Partnership certifying as to
the fulfillment and satisfying the conditions set forth in Sections&nbsp;7.1 and 7.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the
Corporation, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is reasonably likely to result in substantial
damages in respect of, any provision of the Agreement or the consummation of the transactions
contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Approval</U>. The transactions contemplated by this Agreement shall have been
approved through all depositary unit holder action required by the New York Stock Exchange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Registration Rights Agreement</U>. Shareholder shall have executed and delivered the
Registration Rights Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Amendment to Limited Partnership Agreement</U>. AREP&#146;s amended and restated agreement
of limited partnership, dated as of May&nbsp;12, 1987, as amended, shall have been amended (i)&nbsp;as
necessary to consummate this transaction, (including without limitation, modification of Section
4.5(c) thereof to render such section inapplicable to any transactions approved by the audit
committee of AREP), and (ii)&nbsp;such that the general partner and the limited partners, as defined
therein, may not cause AREP, or any successor entity of AREP, whether in its current form as a
limited partnership or as converted to or succeeded by a corporation or other form of business
association, to effect a merger or other business combination of AREP or such successor, in each
case pursuant to Section&nbsp;253 of the General Corporation Law of Delaware, or any successor statute,
or any similar short-form merger statute under the laws of Delaware or any other jurisdiction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Good Standing</U>. The Corporation shall have delivered a certificate of good
standing from the Secretary of State of Delaware to the Partnership, dated within one week of the
Closing Date.


<P align="center" style="font-size: 10pt"><B>ARTICLE VIII</B>



<P align="center" style="font-size: 10pt"><B>TERMINATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Termination</U>. This Agreement may be terminated at any time on or prior to the
Closing Date:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;By written notice of Shareholders or AREP, if the Closing shall not have taken place on or
before September&nbsp;30, 2005; <U>provided</U>, however, that the right to terminate this Agreement
under this Section&nbsp;8.1 shall not be available to any party whose willful failure to


<P align="center" style="font-size: 10pt">18
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">fulfill any
obligation under this Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such date.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;By the Partnership, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of the Shareholders hereunder, and such breach shall
not have been remedied within ten Business Days after receipt by the Shareholders of a notice in
writing from the Partnership specifying the breach and requesting such be remedied; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;By the Shareholders, if there shall have been a material breach of any covenant,
representation or warranty or other agreement of the Partnership hereunder, and such breach shall
not have been remedied within ten Business Days after receipt by the Partnership of notice in
writing from the Shareholders specifying the breach and requesting such be remedied.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Effect of Termination</U>. If this Agreement is terminated pursuant to Section&nbsp;8.1
all obligations of the parties hereunder shall terminate, except for the obligations set forth in
Article&nbsp;IX and Article&nbsp;XI, which shall survive the termination of this Agreement, and except that
no such termination shall relieve any party from liability for any prior willful breach of this
Agreement.


<P align="center" style="font-size: 10pt"><B>ARTICLE IX<BR>
INDEMNIFICATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Indemnification by the Shareholders</U>. Each Shareholder agrees to indemnify the
Partnership, its Affiliates and their respective officers, directors, employees, independent
contractors, stockholders, principals, partners, agents, or representatives (each an &#147;Indemnified
Person&#148; and collectively, the &#147;Indemnified Persons&#148;) against, and to hold each Indemnified Person
harmless from, any and all Losses incurred or suffered by any Indemnified Person relating to or
arising out of or in connection with (a)&nbsp;any breach of or any inaccuracy in any representation or
warranty made by the Shareholders in this Agreement, or (b)&nbsp;any breach of or failure by any
Shareholder to perform any of its covenants or obligations set out or contemplated in this
Agreement. Notwithstanding any provisions to the contrary contained herein, the aggregate
liability of Shareholder and Barberry Corp. for any and all obligations under this Agreement shall
in no event exceed the Merger Price.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Claims</U>. As promptly as is reasonably practicable after becoming aware of a claim
for indemnification under this Agreement, the Indemnified Person shall promptly give notice to the
Shareholders (&#147;Indemnifying Person&#148;) of such claim and the amount the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying Person of its
obligations except to the extent (if any) that the Indemnifying Person shall have been prejudiced
thereby. If the Indemnifying Person does not object in writing to such indemnification claim
within 30&nbsp;days of receiving notice thereof, the Indemnified Person shall be entitled to recover, on
the thirty-fifth day after such notice was given, from the Indemnifying Person the amount of such
claim, and no later objection by the Indemnifying Person shall be permitted; if the Indemnifying
Person agrees that it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be entitled to recover, on the
thirty-fifth day after such notice was given, from the Indemnifying Person the lesser amount,
without

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<P align="left" style="font-size: 10pt">prejudice to the Indemnified
Person&#146;s claim for the difference. In addition to the amounts recoverable by the Indemnified Person from the Indemnifying Person pursuant to the foregoing
provisions, the Indemnified Person shall also be entitled to recover from the Indemnifying Person
interest on such amounts at the rate of Two Times Prime from, and including, the thirty-fifth day after such notice of an indemnification claim is given to, but not including, the
date such recovery is actually made by the Indemnified Person.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Notice of Third Party Claims; Assumption of Defense</U>. The Indemnified Person shall
give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of
any claim, or the commencement of any suit, action or proceeding, by any Person not a party hereto
(a &#147;<U>Third Party Claim</U>&#148;) in respect of which indemnity may be sought under this Agreement;
provided that the failure of the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent (if any) that the Indemnifying Person
shall have been prejudiced thereby. The Indemnifying Person may, at its own expense, participate
in the defense of any Third Party Claim, suit, action or proceeding (a)&nbsp;upon notice to the
Indemnified Person and (b)&nbsp;upon delivery by the Indemnifying Person to the Indemnified Person a
written agreement that the Indemnified Person is entitled to indemnification for all Losses arising
out of such Third Party Claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any such Third Party
Claim, suit, action or proceeding, assume the defense thereof; provided, however, that (i)&nbsp;the
Indemnifying Person&#146;s counsel is reasonably satisfactory to the Indemnified Person, and (ii)&nbsp;the
Indemnifying Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person&#146;s reasonable request for such consultation from time to time with respect to such Third
Party Claim, suit, action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying
Person. If, however, the Indemnified Person reasonably determines in its judgment that
representation by the Indemnifying Person&#146;s counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent or defend it in any such Third Party Claim, action,
suit or proceeding and the Indemnifying Person shall pay all of the fees and disbursements in
connection with the retention of such separate counsel. If the Indemnifying Person fails to
promptly notify the Indemnified Party that the Indemnifying Party desires to defend the Third Party
Claim pursuant, or if the Indemnifying Person gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying Person, the Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by the Indemnified Person in good
faith or will be settled at the discretion of the Indemnified Person (with the consent of the
Indemnifying Person, which consent will not be unreasonably withheld). The Indemnified Person will
have full control of such defense and proceedings, including any compromise or settlement thereof.
Whether or not the Indemnifying Person chooses to defend or prosecute any such Third Party Claim,
suit, action or proceeding, all of the parties hereto shall cooperate in the defense or prosecution
thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Settlement or Compromise</U>. Any settlement or compromise made or caused to be made
by the Indemnified Person or the Indemnifying Person, of any claim, suit, action or proceeding
shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be,
in the same manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise thereof; provided,


<P align="center" style="font-size: 10pt">20
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<P align="left" style="font-size: 10pt">however, that no
obligation, restriction or Loss shall be imposed on the Indemnified
Person as a result of such settlement without its prior
written consent. The Indemnified Person will give the Indemnifying Person at least 30&nbsp;days&#146; notice
of any proposed settlement or compromise of any Third Party Claim, suit, action or proceeding it is
defending, during which time the Indemnifying Person may reject such proposed settlement or
compromise; provided, however, that from and after such rejection, the Indemnifying Person shall be
obligated to assume the defense of and full and complete liability and responsibility for such
Third Party Claim, suit, action or proceeding and any and all Losses in connection therewith in
excess of the amount of unindemnifiable Losses which the Indemnified Person would have been
obligated to pay under the proposed settlement or compromise.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Failure of Indemnifying Person to Act</U>. In the event that the Indemnifying Person
does not assume the defense of any Third Party Claim, suit, action or proceeding brought against an
Indemnified Person, then any failure of the Indemnified Person to defend or to participate in the
defense of any such Third Party Claim, suit, action or proceeding or to cause the same to be done,
shall not relieve the Indemnifying Person of any of its obligations under this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Tax Character</U>. Shareholders and the Partnership agree that any payments pursuant
to this Article&nbsp;IX will be treated for federal and state income tax purposes as adjustments to the
Merger Price, and that they will report such payments on all Tax Returns consistently with such
characterization.


<P align="center" style="font-size: 10pt"><B>ARTICLE X<BR>
DEFINITIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 Definitions. <U>Defined Terms</U>. As used in this Agreement, the following defined
terms have the meanings indicated below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;2004 Reserve Reports&#148; means the reserve reports prepared and certified by an independent
petroleum reserve engineering firm acceptable to both Purchaser and Shareholder which provides
estimates of the net recoverable crude oil and natural gas reserves of the Corporation, for each of
the Reserve Categories, as of January&nbsp;21, 2004. The 2004 Reserve Reports shall be prepared
consistent with industry standards, using methodologies consistent with reserve reports prepared
for the Corporation by independent petroleum reserve engineering firms for years prior to 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Low Reserve Valuation Amount&#148; means the Low Reserve Valuation Amount minus
$21,920,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted High Reserve Valuation Amount&#148; means the High Reserve Valuation Amount minus
$20,420,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adjusted Purchase Amount&#148; means the sum of A and B, where A equals the product of (a)&nbsp;the
difference between the Adjusted High Reserve Valuation Amount and Adjusted Low Reserve Valuation
Amount, and (b)&nbsp;37.4%, and B equals the Adjusted Low Reserve Valuation Amount.


<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Affiliate&#148; means, with respect to any specified Person, any other Person that, directly or
indirectly, owns or controls, is under common ownership or control with, or is owned or controlled
by, such specified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Agreement&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREH&#148;
has the meaning ascribed to it in Section&nbsp;1.1(d).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP
Units&#148;
has the meaning ascribed to it in Section&nbsp;1.1(c).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Arnos&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Assets and Properties&#148; of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or intangible, and
wherever situated), including the goodwill related thereto, operated, owned or leased by such
Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Audited Financial Statements&#148; means the consolidated audited financial statements of the
Corporation as of December&nbsp;31, 2003, consisting of the balance sheet at such date and the related
statements of operations, statement of stockholders equity, and cash flows for the year then ended,
each accompanied by the audit report of KPMG LLP, independent public auditors with respect to the
Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business Day&#148; means any day of the year other than (i)&nbsp;any Saturday or Sunday or (ii)&nbsp;any
other day on which commercial banks located in New York City are generally closed for business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business or Condition&#148; of any Person means the business, condition (financial or otherwise),
properties, assets or results of operations or prospects of such Person, taken as a whole.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLA&#148; means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any successor statutes and any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLIS&#148; means the Comprehensive Environmental Response, Compensation and Liability
Information System List.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Certificate of Merger&#148; has the meaning ascribed to it in Section&nbsp;1.4.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing&#148; has the meaning ascribed to it in Section&nbsp;1.5.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Date&#148; has the meaning ascribed to it in Section&nbsp;1.5.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Reserve Value Ranges&#148; means a calculation of the ranges of present values of the net
estimated cash flows for each of the Reserve Categories of the Corporation, as set forth in the
2004 Reserve Reports, utilizing the ranges of discount rates set forth below, and based on all of
assumptions contained in the 2004 Reserve Reports (except that initial cash prices per barrel


<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">of
oil and per mcf of natural gas shall be as described in Annex A and adjusted on a well-by-well
basis consistent with the methodologies applied in the 2004 Reserve Reports for items such as
transportation, basis differentials, marketing, the quality of the crude oil and the heating
value of the natural gas).









<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">Discount Rates</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Reserve Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">High</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10.0%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Developed Non-Producing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15.0%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved Undeveloped</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">20.0%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Probable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40.0%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">50.0%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing
Statement&#148;
has the meaning ascribed to it in Section&nbsp;1.1(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing
Statement Date&#148;
has the meaning ascribed to it in Section&nbsp;1.1(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contract&#148; means any contract, lease, commitment, understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan, permit or license,
whether written or oral, which is intended or purports to be binding and enforceable.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Corporation&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Dollars&#148; or numbers proceeded by the symbol &#147;$&#148; means amounts in United States Dollars.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Effective
Time&#148;
has the meaning ascribed to it in Section&nbsp;1.4.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Claim&#148; means any third party (including, without limitations, Governmental or
Regulatory Authorities and employees) action, lawsuit, claim or proceeding (including claims or
proceedings under OSHA or similar laws relating to safety of employees) that seeks to impose
liability for (a)&nbsp;pollution or contamination of the ambient air, surface water, ground water or
land; (b)&nbsp;solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation; (c)&nbsp;exposure to hazardous or toxic substances; (d)&nbsp;the safety or health of
employees; or (e)&nbsp;the transportation, processing, distribution in commerce, use or storage of
hydrocarbons or chemical substances. An Environmental Claim includes, but is not limited to, a
common law action, as well as a proceeding to issue, modify or terminate an Environmental Permit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Law&#148; means any law, rule, regulation or order of other requirements of law
(including common law) any federal, foreign, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority with jurisdiction over the Corporation or
any of its properties or assets that relates to (a)&nbsp;pollution or protection of human health,
natural resources and the environment, including ambient air, surface water, ground water or land;
(b)&nbsp;solid, gaseous or liquid waste generation, treatment, storage, disposal or transportation; (c)
exposure to Hazardous Materials; (d)&nbsp;the safety or health of employees; or (e)&nbsp;regulation of the
manufacture, processing, distribution in commerce, use or storage of Hazardous Materials, including
hydrocarbons or chemical substances. Environmental Laws include but are not limited to OSHA,
CERCLA, the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the
Rivers and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as

<P align="center" style="font-size: 10pt">23
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">amended, the Superfund
Amendments and Reauthorization Act of 1986 (&#147;SARA&#148;), as amended, the Resource Conservation and
Recovery Act of 1976 (&#147;RCRA&#148;), as amended, the Hazardous and Solid Waste Amendments Act of 1984, as
amended, the Toxic Substances Control Act, as amended, the Oil Pollution Act of 1990 (&#147;OPA&#148;), as
amended, the Hazardous Materials Transportation Act, as amended, and any other federal, foreign,
state and local law whose purpose is to conserve or protect human health, the environment, wildlife
or natural resources.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Permit&#148; means any permit, license, approval or other authorization under any
Environmental Law, applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other subdivision thereof relating to pollution
or protection of health or the environment, including laws, regulations or other requirements
relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or
hazardous substances or toxic materials or wastes into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transportation or handling of hydrocarbons or chemical subsidiaries, pollutants,
contaminants or hazardous or toxic materials or wastes.





<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ERISA&#148; means the Employee Retirement Income Security Act of 1974, as amended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Financial Statements&#148; means the Audited Financial Statements and the Interim 2004 Financial
Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Fixtures
and Equipment&#148; has the meaning ascribed to it in Section&nbsp;3.18.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GAAP&#148; means U.S. generally accepted accounting principles at the time in effect.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GCL&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;General Partner&#148; has the meaning ascribed to it in Section&nbsp;1.1(d).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Good and Defensible Title&#148; means such right title and interest that is (a)&nbsp;evidenced by an
instrument or instruments filed of record in accordance with the conveyance and recording laws of
the applicable jurisdiction to the extent necessary to prevail against competing claims of bona
fide purchasers for value without notice, and (b)&nbsp;subject to Permitted Encumbrances, free and clear
of all Liens, claims, infringements, burdens and other defects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Governmental or Regulatory Authority&#148; means any court, tribunal, arbitrator, authority,
administrative or other agency, commission, authority, licensing board official or other
instrumentality of the United States or any state, county, city or other political subdivision.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Hazardous Material&#148; means (a)&nbsp;any &#147;hazardous substance,&#148; as defined by CERCLA; (b)&nbsp;any
&#147;hazardous waste&#148; or &#147;solid waste,&#148; in either case as defined by the Resource Conservation and
Recovery Act, as amended; (c)&nbsp;any hazardous, dangerous or toxic chemical, material, waste or
substance, regulated by any Environmental Law; (d)&nbsp;any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof; (e)&nbsp;any asbestos-containing
materials in any form or condition; (f)&nbsp;any polychlorinated biphenyls in any form or condition; (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof; (h)&nbsp;any air pollutant
which is so designated by the U.S. Environmental Protection Agency as authorized


<P align="center" style="font-size: 10pt">24
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">by the Clean Air
Act; or (i)&nbsp;any mold or microbial/microbiological contaminants that pose a risk to human health or
the environment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Highcrest&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;High Reserve Valuation Amount&#148; means the sum of the high range of the Closing Reserve Value
Ranges (based on the low discount rates) for each of Reserve Categories.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance&#148; has the meaning ascribed to it in Section&nbsp;1.1(b)(i).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Imbalance Value&#148; has the meaning ascribed to it in Section&nbsp;1.1(b)(i).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnified
Person&#148; has the meaning ascribed to it in Section&nbsp;9.1.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnifying
Person&#148; has the meaning ascribed to in Section&nbsp;9.2.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Interests&#148;
has the meaning ascribed to it in Section&nbsp;1.1(d).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Interim 2004 Financial Statements&#148; means the unaudited internal financial statements of the
Corporation for the nine months ended September&nbsp;30, 2004, consisting of the balance sheet at such
date and the related statements of operations for the period then ended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Knowledge&#148; means, with respect to the Shareholders and/or the Corporation, in each case the
knowledge of any director, officer or senior executive of each Shareholder, or the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Laws&#148; means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of the United States or any state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;License&#148; means licenses, permits, certificates of authority, authorizations, approvals,
registrations, findings of suitability, variances, exemptions, certificates of occupancy, orders,
franchises and similar consents granted or issued by any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lien&#148; means any mortgage, lien (except for any lien for Taxes not yet due and payable),
charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any
third party, easement, encroachment, encumbrance or other adverse claim of any kind or description.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Limited Partner&#148; has the meaning ascribed to it in Section&nbsp;1.1(d).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Loss&#148; or &#147;Losses&#148; means any and all liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including attorneys&#146; fees and expenses and costs of
investigation and litigation).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Low Reserve Valuation Amount&#148; means the sum of the low range of the Closing Reserve Value
Ranges (based on the high discount rates) for each of Reserve Categories.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;LP
Act&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Material Adverse Effect&#148; or &#147;Material Adverse Change,&#148; as to any Person, means a material
adverse change (or circumstance involving a prospective change) in the Business or

<P align="center" style="font-size: 10pt">25
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">Condition of
such Person, other than changes resulting from changes or fluctuations in the market price of oil,
gas or natural gas.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Meeting&#148;
has the meaning ascribed to it in Section&nbsp;5.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger
Shares&#148; has the meaning ascribed to it in Section&nbsp;1.1(a).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;NEG Agreement&#148; means that certain Membership Interest Purchase Agreement, Dated as of January
21, 2005 by and between AREP and Gascon Partners,.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Oil and Gas Properties&#148; means all of the rights, titles and interests in and to oil and gas
or mineral properties of the Corporation including all oil and gas or mineral leases and other
mineral interests of the Corporation and all of the surface leases, rights-of-way, easements,
licenses, permits, servitudes and other rights-of-use (whether surface, subsurface or subsea) of
the Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Order&#148; means any writ, judgment, decree, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;OSHA&#148; means the Occupational Safety and Health Act, as amended, or any successor statute, and
any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Permitted Encumbrances&#148; means, as applicable,


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;any liens for taxes and assessments not yet delinquent as of the Closing Date;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any Liens or security interests created by law or reserved in oil and gas leases
attributable to any assets or property for royalty, bonus or rental, or created to secure
compliance with the terms of any assets or property;




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any obligations or duties affecting any assets or property to any municipality or public
authority with respect to any franchise, grant, license or permit, and all applicable Laws, rules
and orders of any Governmental or Regulatory Authority;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;any (i)&nbsp;easements, rights-of-way, servitudes, permits, surface leases and other rights in
respect of surface operations, pipelines, grazing, hunting, fishing, lodging, canals, ditches,
reservoirs or the like, and (ii)&nbsp;easements for streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other similar rights-of-way attributable to any assets or
property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;all lessors&#146; royalties, overriding royalties, net profits interests, carried interests,
production payments, reversionary interests and other burdens on or deductions from the proceeds of
production attributable to any assets or property;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;all rights attributable to any assets or property with respect to consent by, required
notices to, filings with, or other actions by Governmental or Regulatory Authorities in connection
with the sale or conveyance of oil and gas leases or interests therein to the extent same are
customarily obtained following such sale or conveyance;



<P align="center" style="font-size: 10pt">26
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;encumbrances securing payments to mechanics and material men and encumbrances attributable
to any assets or property securing payment of taxes or assessments that are, in either case, not
yet delinquent or, if delinquent, are being contested in good faith in the normal course of
business;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;all rights attributable to any assets or property with respect to production sales
contracts; division orders; contracts for sale, purchase, exchange, refining, or processing of
hydrocarbons; unitization and pooling designations, declarations, orders and agreements; operating
agreements; agreements of development; gas balancing or deferred production agreements; processing
agreements; plant agreements; pipeline, gathering and transportation agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements; and any and all other
agreements which are ordinary and customary in the oil, gas and other mineral exploration,
development or extraction business, to the extent such declarations, order and agreements described
in the Schedules attached hereto;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Liens
under the Panaco Note and all related documentation; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;the surety bonds and/or escrow arrangements relating to the U.S. Department of Interior&#146;s
Minerals Management Service, as discussed in the Financial Statements.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Panaco
Common Stock&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Panaco
Note&#148; has the meaning ascribed to it in Section&nbsp;3.12.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Partnership&#148;
has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Person&#148; means any natural person, corporation, limited liability company, general
partnership, limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Plans&#148; shall mean all material pension and profit sharing, retirement and post retirement
welfare benefit, health insurance benefit (medical, dental and vision), disability, life and
accident insurance, sickness benefit, vacation, employee loan and banking privileges, bonus,
incentive,deferred compensation, workers compensation, stock purchase, stock option, phantom stock and
other equity-based, severance, employment, change of control or fringe benefit plans, programs,
arrangements or agreements, whether written or oral, including any employee benefit plans defined
in Section&nbsp;3(3) of ERISA., maintained or contributed to by the Corporation.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proposals&#148;
has the meaning ascribed to it in Section&nbsp;5.2(b).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger Price&#148; has the meaning ascribed to it in Section&nbsp;1.1(a).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Real
Property&#148; has the meaning ascribed to it in Section&nbsp;3.17.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Reserve Categories&#148; means (i)&nbsp;proved developed producing, (ii)&nbsp;proved developed
non-producing, (iii)&nbsp;proved undeveloped, and (iv)&nbsp;probable.






<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Registration Rights Agreement&#148; means the Registration Rights Agreement between Purchaser,
Shareholder, and the other parties thereto, in substantially the form attached hereto as Exhibit&nbsp;A.


<P align="center" style="font-size: 10pt">27
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SEC&#148;
has the meaning ascribed to it in Section 5.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Secretary
of State&#148; has the meaning ascribed to it in Section&nbsp;1.4.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Shareholder&#148;
and &#147;Shareholders&#148; have the meaning ascribed to them in the
recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Statement&#148;
has the meaning ascribed to it in Section 5.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Surviving
Entity&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax Return&#148; means any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect
to Taxes, including attachments thereto and amendments thereof, and including, without limitation,
information returns, any documents with respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Taxes&#148; means any and all taxes, charges, fees, levies, duties, liabilities, impositions or
other assessments, including, without limitation, income, gross receipts, profits, excise, real or
personal property, environmental, recapture, sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service, license, net worth, payroll, franchise,
gains, stamp, transfer and recording taxes, fees and charges, imposed by the Internal Revenue
Service (&#147;IRS&#148;) or any other taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect
to, any such taxes, charges, fees, levies, duties, liabilities, impositions or other assessments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax&#148; shall have a correlative meaning.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Third Party Claim&#148; has the meaning ascribed to it in Section&nbsp;9.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;TransTexas Agreement&#148; means that certain Agreement and Plan of Merger dated as of January&nbsp;21,
2005, by and among National Onshore LP, Highcrest Investors Corp. and TransTexas Gas Corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Two Times Prime&#148; means two times the prime rate published by Citibank, N.A.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Well&#148; or &#147;Wells&#148; means all of the oil, gas and condensate wells, (whether producing, not
producing or abandoned or temporarily abandoned) in which the Company holds an interest.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Written
Consent&#148; has the meaning ascribed to it in Section&nbsp;2.2.



<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>ARTICLE XI</B>


<DIV align="center" style="font-size: 10pt"><B>MISCELLANEOUS</B></DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 <U>Investigation</U>. It shall be no defense to an action for breach of this Agreement
that the Partnership or its agents have (or have not) made
investigations into the affairs of the Corporation or that the Corporation or the Shareholders could not have known of the
misrepresentation or breach of warranty.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 <U>Survival of Representations and Warranties</U>. The representations and warranties
of the parties hereunder shall survive the Closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 <U>Entire Agreement</U>. This Agreement, including the schedules and exhibits hereto,
which are incorporated herein and made an integrated part hereof, constitutes the entire agreement
between the parties hereto and supersedes any and all prior discussions and agreements between the
parties relating to the subject matter hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4 <U>Waiver</U>. Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5 <U>Amendment</U>. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6 <U>No Third Party Beneficiary</U>. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third party beneficiary rights upon
any other Person, except that each Indemnified Persons shall be a third party beneficiary of
Article&nbsp;IX.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7 <U>Assignment; Binding Effect</U>. No party may assign this Agreement or any right,
interest or obligation hereunder without the prior written consent of the other Parties. This
Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8 <U>Headings</U>. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9 <U>Invalid Provisions</U>. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or obligations of any
party hereto under this Agreement will not be materially and adversely affected thereby, (a)&nbsp;such
provision will be fully severable, (b)&nbsp;this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof, and (c)&nbsp;the
remaining provisions of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance here from.



<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10 <U>Governing Law</U>. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the conflicts of laws principles
thereof, except as to matters relating to the internal affairs of the Partnership, the Shareholders
or the Corporation, which shall be governed by Delaware law.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one and the
same instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12 <U>Waiver of Jury Trial</U>. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST ANY OTHER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR
THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. No party to
this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of, this Agreement or any related instruments or
the relationship between the parties. No party will seek to consolidate any such action in which a
jury trial has been waived with any other action in which a jury trial cannot be or has not been
waived. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13 <U>Consent to Jurisdiction</U>. Each party irrevocably submits to the exclusive
jurisdiction of any NY State Court in the County of New York or any courts of the United States of
America located in the Southern District of New York, and each party hereby agrees that all suits,
actions and proceedings brought by such party hereunder shall be brought in any such court. Each party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any such court, any claim
that any such suit, action or proceeding brought in such a court has been brought in an
inconvenient forum and the right to object, with respect to any such suit, action or proceeding
brought in any such court, that such court does not have jurisdiction over such party or the other
party. In any such suit, action or proceeding, each party waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other process and agrees that the
service thereof may be made by any means permitted by Section&nbsp;0 (other than facsimile
transmission). Each party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14 <U>Expenses</U>. All expenses, costs and fees in connection with the transactions
contemplated hereby (including fees and disbursements of counsel, consultants and accountants)
incurred by (a)&nbsp;the Shareholders shall be paid and borne exclusively by the Shareholders, and (b)
the Partnership shall be paid and borne exclusively by the Partnership. Notwithstanding the
foregoing, if this Agreement is terminated prior to the Closing and such termination results from
any breach by the Shareholders or the Partnership, as the case may be, of any representation,
warranty or covenant by such party, then such breaching party shall reimburse the non-breaching
party for all such expenses, fees and cash, including for all expenses, fees and cash incurred in
connection with obtaining high yield or other financing.



<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.15 <U>Notices</U>. All notices, request, demands and other communications hereunder shall
be in writing and shall be delivered personally, by certified or registered mail, return receipt
requested, and postage prepaid, by courier, or by facsimile transmission, addressed as follows:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>If to the Shareholders:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>c/o Icahn Associates Corp.<BR>
767 Fifth Avenue, Suite&nbsp;4700<BR>
New York, NY 10153</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>If to the Partnership:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>c/o American Real Estate Partners, L.P.<BR>
100 South Bedford Rd.<BR>
Mt. Kisco, NY 10549</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>With a copy to:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="18%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Debevoise &#038; Plimpton LLP<BR>
919 Third Avenue<BR>
New York, NY 10022<BR>
Attention: William D. Regner</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">or to such other address as a party may from time to time designate in writing in accordance with
this Section&nbsp;11.15. Each notice or other communication given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been received (a)&nbsp;on the Business Day
it is sent, if sent by personal delivery, (b)&nbsp;the earlier of receipt of three Business Days after
having been sent by certified or registered mail, return receipt requested and postage prepaid, (c)
on the Business Day it is sent, if sent by facsimile transmission and an activity report showing
the correct facsimile number of the party on whom notice is served and the correct number of pages
transmitted is obtained by the sender (provided, however, that such notice or other communication
is also sent by some other means permitted by this Section&nbsp;11.15, or (d)&nbsp;on the first Business Day
after sending, if sent by courier or overnight delivery.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.16 <U>Further Assurances</U>. Each of the parties hereto covenants and agrees that, from
time to time subsequent to Closing, it will, at the request of the other party, execute and deliver
all such documents, including, without limitation, all such additional conveyances, transfers,
consents and other assurances and do all such other acts and things as such other party may from
time to time request be executed or done in order to better evidence, perfect or effect any
provision of this Agreement, or of any agreement or other document executed pursuant to this
Agreement, or any of the respective obligations intended to be created hereby or thereby.


<P align="center" style="font-size: 10pt"><B>&#091;Signature Page Follows&#093;</B>




<P align="center" style="font-size: 10pt">31
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
officer of each party hereto as of the date first above written.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Highcrest Investors Corp.</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Jon Weber
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Jon Weber&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Assistant Secretary</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Arnos Corp.</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                             /s/ Edward E. Mattner
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Edward E. Mattner&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Vice President</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Panaco, Inc.</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Bob G. Alexander
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Bob G. Alexander         &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>National Offshore LP</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: Offshore GP LLC, its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: AREP Oil &#038; Gas LLC, its sole member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: American Real Estate Holdings Limited Partnership, its sole member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: American Property Investors, Inc., its general partner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Keith A. Meister
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Keith A. Meister    &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>American Real Estate Partners, L.P.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: American Property Investors, Inc., its general partner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Keith A. Meister
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Keith A. Meister     &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>For Purposes of Section&nbsp;5.2(b) only:</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>BARBERRY CORP</B>.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Edward E. Mattner
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Edward E. Mattner&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Authorized Signatory&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>HIGH COAST LIMITED PARTNERSHIP</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By: Little Meadow Corp., its general partner</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                      /s/ Edward E. Mattner
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Edward E. Mattner&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Authorized Signatory&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">GUARANTY: The undersigned hereby guarantees the payment and performance by National Offshore
LP of all of its duties and obligations under this Agreement when due.



<P align="left" style="font-size: 10pt"><B>American Real Estate
Partners, L.P.</B><BR>
By: American Property Investors, Inc., its general partner




<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By: /s/ Keith A. Meister</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade color="#000000">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name: Keith A. Meister</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title: President and Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">GUARANTY: The undersigned hereby guarantees the payment and performance by Arnos Corp. and
Highcrest Investors Corp. of all of their duties and obligations under this Agreement when due.



<P align="left" style="font-size: 10pt"><B>BARBERRY CORP.</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By: /s/ Edward E. Mattner
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name: Edward E. Mattner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title: Authorized Signatory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Panaco Merger Agreement &#150; Highcrest and Arnos to AREP&#093;



<P align="center" style="font-size: 10pt">34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U>Exhibit&nbsp;A</U>



<P align="center" style="font-size: 10pt"><U>Form&nbsp;Of Registration Rights Agreement </U>



<P align="center" style="font-size: 10pt">34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U>ANNEX A</U>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Oil Price ($/Bbl)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gas Price ($/mcf)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.267</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">35
</DIV>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>y05076exv99w4.htm
<DESCRIPTION>EX-99.4: PURCHASE AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>EXHIBIT 99.4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">EXHIBIT 99.4



<P align="center" style="font-size: 10pt">PURCHASE AGREEMENT



<P align="center" style="font-size: 10pt">Dated as of January&nbsp;21, 2005



<P align="center" style="font-size: 10pt">by and among



<P align="center" style="font-size: 10pt">American Real Estate Partners, L.P., as Purchaser,



<P align="center" style="font-size: 10pt">and



<P align="center" style="font-size: 10pt">Cyprus, LLC, as Seller




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>Table of Contents</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE I<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"> SALE OF SECURITIES AND CLOSING</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase and Sale</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase Price</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Closing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions at the Closing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contingent Consideration</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Treatment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  ARTICLE II<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  REPRESENTATIONS AND WARRANTIES OF SELLER</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Seller</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consents and Approvals</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brokers</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  ARTICLE III<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES  OF SELLER RELATING TO THE COMPANY AND THE SUBSIDIAIRIES</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization of Company and the Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Adverse Effects or Changes</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Properties</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims Against Officers and Directors</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Law</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undisclosed Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Related Parties</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Matters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employees, Labor Matters, etc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Benefit Plans</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
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<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.17</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Property</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.18</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Personal Property</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.19</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contracts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.20</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.21</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accuracy of Statements</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IV<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">REPRESENTATIONS AND WARRANTIES OF PURCHASER</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Organization of Purchaser</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"> ARTICLE V<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Business Prior to Closing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Efforts to Consummate Transaction</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">   ARTICLE VI<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  ASSIGNMENT OF RIGHTS RELATING TO THE SECURITIES</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment of Rights, etc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  ARTICLE VII<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">  CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by Seller</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Seller&#146;s Certificates</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Adverse Change</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">   ARTICLE VIII<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"> CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warranties True as of Both Present Date and Closing Date</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance by Purchaser</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchaser&#146;s Certificate</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Actions or Proceedings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approval</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Limited Partnership Agreement</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE IX<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TERMINATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effect of Termination</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE X<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">INDEMNIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnification by Seller</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Claims</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Third Party Claims; Assumption of Defense</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Settlement or Compromise</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Failure of Indemnifying Person to Act</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Character</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE XI<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DEFINITIONS</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitions</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">ARTICLE XII<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investigation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations and Warranties</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Third Party Beneficiary</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment; Binding Effect</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalid Provisions</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Jury Trial</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent to Jurisdiction</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This PURCHASE AGREEMENT (the or this &#147;Agreement&#148;) dated as of January&nbsp;21, 2005 is made and
entered into by and among Cyprus, LLC, a Delaware limited liability company (&#147;Seller&#148;), and
American Real Estate Partners, L.P. (&#147;Purchaser&#148;). Capitalized terms not otherwise defined herein
have the meanings set forth in Article&nbsp;XI.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Seller owns the securities listed on <U>Annex A</U> hereto (collectively, the
&#147;Securities&#148;) and Purchaser desires to purchase the Securities from Seller on the terms and subject
to the conditions set forth in this Agreement; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Seller desires to sell the Securities to Purchaser on the terms and subject to the
conditions set forth in this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


<P align="center" style="font-size: 10pt"><B>ARTICLE I<BR>
SALE OF SECURITIES AND CLOSING</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Purchase and Sale</U>. Seller hereby agrees to sell to Purchaser the Securities and
Purchaser hereby agrees to purchase from Seller the Securities at the Closing on the terms and
subject to the conditions set forth in this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Purchase Price</U>. The amount payable to Seller at the Closing is 413,793 depositary
units representing limited partnership interests (&#147;<U>AREP Units</U>&#148;) of Purchaser (the
&#147;<U>Closing Consideration</U>&#148; and together with the Contingent Consideration, if any, determined
in accordance with Section&nbsp;1.6, the &#147;<U>Purchase Price</U>&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Closing</U>. Upon the terms and subject to the conditions of this Agreement, the closing
of the transactions contemplated hereby (the &#147;<U>Closing</U>&#148;) shall take place (a)&nbsp;at the offices
of Purchaser, located at 100 South Bedford Road, Mt. Kisco, NY at 10:00 a. m., local time, on the
second business day immediately following the day on which the last to be satisfied or waived of
the conditions set forth in Articles VII and VIII (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions)
shall be satisfied or waived in accordance herewith or (b)&nbsp;at such other time, date or place as
Purchaser and Seller may agree. The date on which the Closing occurs is herein referred to as the
&#147;Closing Date.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Actions at the Closing</U>. At the Closing: (i)&nbsp;Purchaser shall deliver to the Seller
one or more certificates representing the AREP Units constituting the Closing Consideration, (ii)
Seller shall deliver to Purchaser Designee (as defined below) the Securities, together with
instruments of transfer satisfactory to Purchaser, or, in the case of Securities that are held in
book-entry form at the Depository Trust Company (&#147;<U>DTC</U>&#148;), Seller shall cause such Securities
to be delivered to the DTC account designated in writing by Purchaser Designee, (iii)&nbsp;Seller shall
deliver or cause to be delivered to Purchaser the certificate described in Section&nbsp;7.3 and (iv)
Purchaser shall deliver or cause to be delivered to Seller the items required by Sections&nbsp;8.3 and
8.5.


<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Contingent Consideration</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;As soon as is practicable after the end of each of the fiscal years 2005 and 2006, the
Purchaser shall cause Atlantic Holdings to deliver to the chairman of the audit committee of the
Purchaser and to Seller, a statement of EBITDA for such fiscal year, certified by Atlantic
Holdings&#146; independent auditors and Chief Financial Officer (the &#147;<U>EBITDA Statements</U>&#148;).



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;If the EBITDA as set forth on the EBITDA Statements is equal to or greater than $24
million for each of the fiscal years 2005 and 2006, Purchaser shall pay to the Seller 206,897
(subject to equitable adjustment in the event of any stock split, reverse stock split, stock
dividend or other similar event) AREP Units (the &#147;<U>Contingent Consideration</U>&#148;) as soon as is
practicable, but in no event later than 10&nbsp;days, following delivery of the EBITDA Statement for
the fiscal year 2006.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Tax Treatment</U>. The Sellers and AREP agree and acknowledge that the sale of the
Securities to Purchaser shall qualify as a nonrecognition transaction pursuant to Section 721(a) of
the Internal Revenue Code of 1986, as amended.


<P align="center" style="font-size: 10pt"><B>ARTICLE II<BR><BR>
REPRESENTATIONS AND WARRANTIES OF SELLER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to Purchaser to enter into this Agreement, Seller hereby makes the following
representations and warranties to Purchaser:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Organization of Seller</U>. Seller is a limited liability company duly organized,
validly existing and in good standing under the Laws of the State of Delaware. Seller has full
organizational power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby, including without
limitation, to sell and transfer (pursuant to this Agreement) the Securities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Authority</U>. The execution and delivery by Seller of this Agreement, and the
performance by Seller of its obligations hereunder, have been duly and validly authorized by
Seller&#146;s Managing Member and no other action on the part of Seller or its Managing Member is
necessary for such execution, delivery or performance. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Title</U>. The delivery of the Securities and other instruments of transfer delivered
by Seller to Purchaser at the Closing will transfer to Purchaser good and valid title to the
Securities, free and clear of all Liens.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>No Conflicts</U>. The execution and delivery by Seller of this Agreement do not, and
the performance by Seller of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:



<P align="center" style="font-size: 10pt">2
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with or result in a violation or breach of any of the terms, conditions or
provisions of the organizational documents of Seller;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with or result in a violation or breach of any term or provision of any Law or
Order applicable to Seller or any of its Assets and Properties; or



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) (i)&nbsp;conflict with or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Seller to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as a result or under
the terms of, (iv)&nbsp;result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or imposition of
any Lien upon Seller or any of its Assets and Properties under, any Contract or License to which
Seller is a party or by which any of its Assets and Properties is bound.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Consents and Approvals</U>. Except for (i)&nbsp;the requirement that timely notice of the
transactions contemplated by this Agreement be furnished to the New Jersey Casino Control
Commission, (ii)&nbsp;the approval of depositary unit holders of the Purchaser required by the New York
Stock Exchange, and (iii)&nbsp;approvals to amend the Purchaser&#146;s amended and restated agreement of
limited partnership, dated as of May&nbsp;12, 1987, as amended, as contemplated by Section&nbsp;8.7 hereof,
no consent, authorization or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is necessary in connection
with the execution, delivery and performance by Seller of this Agreement or the consummation of the
transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Brokers</U>. Neither Seller nor the Company nor any Subsidiary has used any broker or
finder in connection with the transactions contemplated hereby, and neither Purchaser nor any
Affiliate of Purchaser has or shall have any liability or otherwise suffer or incur any Loss as a
result of or in connection with any brokerage or finder&#146;s fee or other commission of any Person
retained or purporting to be retained by Seller or by the Company or any Subsidiary in connection
with any of the transactions contemplated by this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Company, any Subsidiary or Seller to Purchaser or any representative or Affiliate of
Purchaser in connection with this Agreement or any of the transactions contemplated hereby contains
or will contain any untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.


<P align="center" style="font-size: 10pt"><B>ARTICLE III</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES<BR>
OF SELLER RELATING TO THE COMPANY AND THE SUBSIDIAIRIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an inducement to Purchaser to enter into this Agreement, Seller hereby makes the following
representations to Purchaser, except as set forth in the Disclosure Schedule attached to this
Agreement (it being agreed that any exceptions to such representations and warranties shall clearly
identify the sections of this Agreement to which they apply).


<P align="center" style="font-size: 10pt">3
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Due Organization of Company and the Subsidiaries</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and each of the Subsidiaries is duly organized and validly existing under the
laws of the state in which it is incorporated or organized, as the
case may be, with all requisite power and authority to own, lease and operate its properties and to carry
on its business as they are now being owned, leased, operated and conducted. The Company and each
of the Subsidiaries is licensed or qualified to do business and is in good standing (where the
concept of &#147;good standing&#148; is applicable) as a foreign corporation in each jurisdiction where the
nature of the properties owned, leased or operated by it and the business transacted by it require
such licensing or qualification (except, with respect to the Subsidiaries, where the failure to be
so licensed or qualified or be in good standing will not in the aggregate adversely affect the
validity or enforceability of this Agreement or have a Material Adverse Effect on any of the
Subsidiaries).



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Seller has delivered to Purchaser true, correct and complete copies of the
organizational documents of the Company and the Subsidiaries, which organizational documents are in
full force and effect.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Capitalization</U>. Immediately prior to the Closing, the Seller will own the
Securities, free and clear of all Liens. The Company owns 100% of the outstanding capital stock of
Atlantic Coast Entertainment Holdings, Inc., a Delaware corporation (&#147;<U>Atlantic Holdings</U>&#148;),
and Atlantic Holdings owns 100% of the membership interests in ACE Gaming, LLC, a New Jersey
limited liability company (&#147;<U>Ace</U>&#148;). Except as set forth on Schedule&nbsp;3.2, no Person holds
any option, warrant, convertible security or other right to acquire any interest in the Company or
any of the Subsidiaries. There are no obligations, contingent or otherwise, of the Company or the
Subsidiaries to repurchase, redeem or otherwise acquire any ownership interests of the Company or
any Subsidiary or to provide funds to or make any material investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary or any other Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Subsidiaries</U>. The Company has no subsidiaries other than Atlantic Holdings and
Ace. Atlantic Holdings has no subsidiaries other than Ace. Ace has no subsidiaries. Except for
its interests in the Subsidiaries, neither the Company nor any of the Subsidiaries owns directly or
indirectly any ownership or other investment interest, either of record, beneficially or equitably,
in any Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Financial Statements</U>. (a)&nbsp;The Seller has delivered to Purchaser true, correct and
complete copies of the Audited Financial Statements. The Audited Financial Statements have been
prepared in accordance with GAAP consistently applied and present fairly the financial position,
assets, liabilities and retained earnings of the respective companies as of the dates thereof and
the revenues, expenses, results of operations, and cash flows of the respective companies for the
periods covered thereby. The Audited Financial Statements are in accordance with the books and
records of the respective companies, do not reflect any transactions which are not bona fide
transactions and do not contain any untrue statement of a material fact (whether or not required to
be disclosed under GAAP) or omit to state any material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not misleading.




<P align="center" style="font-size: 10pt">4
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Seller has delivered to Purchaser true and complete copies of the Interim 2004
Financial Statements. The Interim 2004 Financial Statements present fairly the financial position,
assets, liabilities and retained earnings of the respective companies as of the dates thereof and
the revenues, expenses, results of operations, and cash flows of the respective companies for the
periods covered thereby. The Interim 2004 Financial Statements are in accordance with the books
and records of the respective companies, do not reflect any transactions which are not bona fide
transactions and do not contain any untrue statement of a material fact (whether or not required to be disclosed under GAAP) or omit to state any
material fact necessary to make the statements contained therein, in light of the circumstances in
which they were made, not misleading.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>No Adverse Effects or Changes</U>. Since December&nbsp;31, 2003, (i)&nbsp;neither the Company
nor any of the Subsidiaries has suffered any Material Adverse Effect; (ii)&nbsp;there has been no
change, event, development, damage or circumstance affecting the Company or the Subsidiaries that,
individually or in the aggregate,e could reasonably be expected to have a Material Adverse Effect
on the Company or any of the Subsidiaries; (iii)&nbsp;there has not been any change by the Company or
any of the Subsidiaries in its accounting methods, principles or practices, or any revaluation by
the Company or any of the Subsidiaries of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable; and (iv)&nbsp;the Company and each of the
Subsidiaries has conducted its business only in the ordinary course of business consistent with
past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6 <U>Title to Properties</U>. Each of the Company and the Subsidiaries has good and
marketable title to, and each Subsidiary is the lawful owner of, all of the tangible and intangible
assets, properties and rights used in connection with its respective businesses and all of the
tangible and intangible assets, properties and rights reflected in the Financial Statements, except
for changes accruing in the ordinary course of business that would not, individually or in the
aggregate, adversely affect the ability of the Company or any of the Subsidiaries to conduct its
business in the ordinary course, consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7 <U>Litigation</U>. Except as disclosed in the Financial Statements, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations, with such exceptions as are individually, or in the aggregate, not
material in nature or amount, pending or, to the Knowledge of Seller, threatened against or
affecting the Company, the Subsidiaries or any of their respective officers, directors, employees
or agents in their capacity as such, or any of the Company&#146;s Assets and Properties or businesses of
the Company or any of the Subsidiaries, and to Seller&#146;s Knowledge, any facts or circumstances which
may give rise to any of the foregoing. Except as disclosed in the Financial Statements, neither
the Company nor any of the Subsidiaries is subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8 <U>Claims Against Officers and Directors</U>. There are no pending or, to the Seller&#146;s
Knowledge, threatened claims against any director, officer, employee or agent of the Company, the
Subsidiaries or any other Person, which could give rise to any claim for indemnification against
the Company or the Subsidiaries or cause the Company or the Subsidiaries to incur any material
liability or otherwise suffer or incur any material Loss.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.9 <U>Insurance</U>.



<P align="center" style="font-size: 10pt">5
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries maintain insurance policies that provide adequate and
suitable insurance coverage for the business of the Company and the Subsidiaries and are on such
terms, cover such risks and are in such amounts as the insurance customarily carried by comparable
companies of established reputation similarly situated and carrying on the same or similar
business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, Seller has delivered to Purchaser all insurance policies
(including policies providing property, casualty, liability, workers&#146; compensation, and bond and
surety arrangements) under which the Company or any of the Subsidiaries are an insured, a named
insured or otherwise the principal beneficiary of coverage. All insurance policies of the Company
and each of the Subsidiaries are in full force and effect. The Company and the Subsidiaries have
not received notice of any refusal of coverage with respect to an existing policy. The Company and
the Subsidiaries have paid all premiums due under all such policies. The amount of the reserve for
self-insured risks as of November&nbsp;30, 2004 are set forth on <U>Schedule&nbsp;3.9(b)</U>, and such
reserves shall be maintained in accordance with past practice.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <U>Compliance with Law</U>. Except as set forth in the Financial Statements, the
Company and the Subsidiaries are in compliance and, at all times, have been in compliance in all
respects with all applicable Laws relating to the Company or the Subsidiaries or their respective
Assets and Properties or businesses. Except as disclosed in the Financial Statements, no
investigation or review by any governmental authority or self-regulatory authority is pending or,
to Seller&#146;s Knowledge, threatened, nor has any such authority indicated orally or in writing to the
Seller, the Company or any of the Subsidiaries an intention to conduct an investigation or review
of the Company or any of the Subsidiaries or, with respect to the Company or any of the
Subsidiaries, or Seller.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <U>Undisclosed Liabilities</U>. Except as disclosed in the Financial Statements and the
Interim 2004 Financial Statements, neither the Company nor any of the Subsidiaries has any material
liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, other than liabilities and obligations incurred
after September&nbsp;30, 2004 in the ordinary course of business consistent with past practice
(including as to amount and nature).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12 <U>Related Parties</U>. Except as disclosed in the Financial Statements or in public
filings of the Company or Atlantic Holdings, and except for transactions solely between the Company
and the Subsidiaries or solely between the Company&#146;s Subsidiaries, (i)&nbsp;no Affiliate of the Company
is a party to any Contract with the Company or any of the Subsidiaries; (ii)&nbsp;no Affiliate of the
Company owes any material amount of money to, nor is such Affiliate owed any material amount of
money by, the Company or any of the Subsidiaries, (iii)&nbsp;neither the Company nor any of the
Subsidiaries has, directly or indirectly, guaranteed or assumed any indebtedness for borrowed money
or otherwise for the benefit of an Affiliate of the Company or any of the Subsidiaries; and (iv)
neither the Company nor any of the Subsidiaries has made any material payment to, or engaged in any
material transaction with, an Affiliate of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13 <U>Intellectual Property</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries own, or possess adequate rights to use, all material
patents, trade names, trademarks, copyrights, inventions, processes, designs,




<P align="center" style="font-size: 10pt">6
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<P align="left" style="font-size: 10pt">formulae, trade
secrets, know-how and other intellectual property rights necessary for, used or held for use in the
conduct of their businesses. All material intellectual property necessary for used or held for use
in the conduct of the businesses of the Company and any of the Subsidiaries has been duly
registered with, filed in or issued by the relevant filing offices, domestic or foreign, to the
extent necessary or desirable to ensure full protection under any applicable Law, and such
registrations, filings or issuances remain in full force and effect.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The conduct of the business of the Company and the Subsidiaries does not infringe or
otherwise conflict with any rights of any Person in respect of intellectual property rights. None
of the intellectual property rights owned by the Company or the Subsidiaries is being infringed or
otherwise, in any way, used or available for use by any Person without a license or permission from
the Company and the Subsidiaries and neither the Company nor any of the Subsidiaries has taken or
omitted to take any action which would have the effect of waiving any of its rights thereunder.
Neither the Company nor any of the Subsidiaries has received a claim of infringement or conflict by
any third party in respect of any intellectual property used by the Company or the Subsidiaries.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.14 <U>Environmental Matters</U>. Except as set forth in the disclosure documents of the
Company or Atlantic Holdings filed publicly with the U.S. Securities and Exchange Commission (the
&#147;SEC&#148;) prior to the date hereof, or as set forth in the Financial Statements:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and each of the Subsidiaries have obtained all material Environmental Permits
that are required with respect to their respective Assets and Properties and businesses, either
owned or leased;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Company, each of the Subsidiaries, and their respective Assets and Properties and
businesses, are and have been in compliance in all material respects with all terms and conditions
of all applicable Environmental Laws and Environmental Permits;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no Environmental Claims pending or, to the Knowledge of Seller, threatened
against the Company or any of the Subsidiaries. Neither the Company nor any of the Subsidiaries
has received any notice from any Governmental or Regulatory Authority or any person of any
violation or liability arising under any Environmental Law or Environmental Permit in connection
with its Assets and Properties, businesses or operations;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the Company, nor any of its Subsidiaries, nor any other Person has caused or taken
any action that will result in any material liability, obligation or cost on the part of the
Company or any of its Subsidiaries relating to (x)&nbsp;environmental conditions on, above, under or
from any properties or assets currently or formerly owned, leased, operated or used by the Company
or any of its Subsidiaries, or (y)&nbsp;the past or present use, management, transport, treatment,
generation, storage, disposal, release or threatened release of Hazardous Materials.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Neither the Company nor any of the Subsidiaries owns, leases or operates or has owned,
leased or operated, any property listed on the National Priorities List pursuant to CERCLA or on
the CERCLIS or on any other federal or state list as sites requiring investigation or cleanup;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Company nor any of the Subsidiaries is transporting, has transported, or is
arranging for the transportation of, any Hazardous Material to any location



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<P align="left" style="font-size: 10pt">which is listed on the
National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state
list or which is the subject of federal, state or local enforcement actions or other investigations
that may lead to material claims against the Company or the Subsidiaries for investigative or
remedial work, damage to natural resources, property damage or personal injury including claims
under CERCLA;

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;There are no sites, locations or operations at which the Company or any of the
Subsidiaries is currently undertaking, or has completed, any investigative, remedial, response or
corrective action as required by Environmental Laws;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;There are no physical or environmental conditions existing on any property owned or leased
by the Company or the Subsidiaries resulting from their respective operations or activities, past
or present, at any location, that would give rise to any material on-site or off-site investigative
or remedial obligations or any corrective action under any applicable Environmental Laws; and



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Seller has provided to Purchaser all material environmental site assessments, audits,
investigations and studies in its possession, custody or control.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.15 <U>Employees, Labor Matters, etc</U>. Except as set forth in the Financial Statements,
neither the Company nor any of the Subsidiaries is a party to or bound by, and none of their
employees is subject to, any collective bargaining agreement, and there are no labor unions or
other organizations representing, purporting to represent or attempting to represent any employees
employed by the Company or any of the Subsidiaries. There has not occurred or been threatened any
material strike, slow down, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees of the Company or any of the Subsidiaries.
There are no labor disputes currently subject to any grievance procedure, arbitration or litigation
and there is no representation petition pending or threatened with respect to any employee of the
Company or any of the Subsidiaries. The Company and the Subsidiaries have complied with all
applicable Laws pertaining to the employment or termination of employment of their respective
employees, including, without limitation, all such Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited discrimination or distinction and
other similar employment activities; except for any failure to comply that, individually and in the
aggregate, is not reasonably likely to result in any Company Material Adverse Effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.16 <U>Employee Benefit Plans</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as set forth in the Financial Statements or accrued thereafter in accordance with
the terms of the Plans as of the date hereof, neither the Company nor any of the Subsidiaries has
incurred any material liability, and no event, transaction or condition has occurred or exists that
could result in any material liability, on account of any Plans, including but not limited to
liability for (i)&nbsp;additional contributions required to be made under the terms of any Plan or its
related trust, insurance contract or other funding arrangement with respect to periods ending on or
prior to the date hereof which are not reflected, reserved against or accrued in the Financial
Statements; (ii)&nbsp;breaches by the Company or any of the Subsidiaries, or any of their employees,
officers, directors, stockholders, or, to the Knowledge of Seller, the trustees under the trusts
created under the Plans, or any other Persons under ERISA or any other



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<P align="left" style="font-size: 10pt">applicable Law; or (iii)
income taxes by reason of non-qualification of the Plans. Each of the Plans has been operated and
administered in all material respects in compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. Since September&nbsp;30, 2004, neither the Company nor any
of the Subsidiaries has communicated to any current or former director, officer, employee or
consultant thereof any intention or commitment to amend or modify any Plan, or to establish or
implement any other employee or retiree benefit or compensation plan or arrangement, which would
materially increase the cost to the Company or any Subsidiary.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Each Plan which is intended to be &#147;qualified&#148; within the meaning of section 401(a) of the
Code, and the trust (if any) forming a part thereof has received a favorable determination letter
or is covered by an opinion letter from the Internal Revenue Service and no event has occurred and
no condition exists which could reasonably be expected to result in the revocation of any such
determination. All amendments and actions required to bring each Plan into conformity with the
applicable provisions of ERISA, the Code, and any other applicable Laws have been made or taken.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;There are no pending or threatened claims (and no facts or circumstances exist that could
give rise to any such claims) by or on behalf of any participant in any of the Plans, or otherwise
involving any such Plan or the assets of any Plan, other than routine claims for benefits in the
ordinary course. The Plans are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of Labor, or any other
Governmental or Regulatory Authority.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;None of the Plans provides benefits of any kind with respect to current or former
employees, officers, or directors (or their beneficiaries) of the Company and the Subsidiaries
beyond their retirement or other termination of employment, other than (<U>i</U>) coverage for
benefits mandated by Section&nbsp;4980B or the Code, (<U>ii</U>) death benefits or retirement benefits
under an employee pension benefit plan (as defined by section 3(2) of ERISA), or (<U>iii</U>)
benefits, the full cost of which is borne by such current or former employees, officers, directors,
or beneficiaries.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Except as set forth in the Financial Statements, no Plan sponsored by the Company and the
Subsidiaries is a &#147;multiemployer plan&#148; within the meaning of Section&nbsp;4001(a)(3) of ERISA or a
&#147;multiple employer plan&#148; as addressed in section 4063 or 4064 of ERISA. No Plan sponsored by the
Company and the Subsidiaries is subject to Title IV of ERISA.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The consummation of the transactions contemplated by this Agreement will not (alone or in
combination with any other event, including, without limitation, the passage of time) result in (i)
any payment (including, without limitation, severance, unemployment compensation, golden parachute,
bonus payments or otherwise) becoming due under any agreement or oral arrangement to any current or
former director, officer, employee or consultant of the Company and the Subsidiaries, (ii)&nbsp;any
increase in the amount of salary, wages or other benefits payable to any director, officer,
employee or consultant of the Company and the Subsidiaries, or (iii)&nbsp;any acceleration of the
vesting or timing of payment of any benefits or compensation (including, without limitation, any
increased or accelerated funding obligation) payable to any director, officer, employee or
consultant of the Company and the Subsidiaries.


<P align="center" style="font-size: 10pt">9
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.17 <U>Real Property</U>. (a)&nbsp;Schedule&nbsp;3.17(a) contains a legal description of each parcel
of real property owned by the Company or any of the Subsidiaries (including the address thereof)
and a legal description of each parcel in which the Company or any of the Subsidiaries hold a valid
easement to use such parcel. The Company or a Subsidiary, as applicable, has good and marketable
title to or easement in each such parcel of real property, free and clear of all Liens other than
Permitted Encumbrances.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Schedule&nbsp;3.17(b) contains a list of each parcel of real property leased by the Company or
any of the Subsidiaries. The Company or a Subsidiary has a valid and subsisting leasehold estate
in each such parcel of real property, free and clear of Liens created
by the Company or a Subsidiary other than the Permitted Encumbrances. All of the real property
leases are valid, binding, and enforceable in accordance with their terms, and are in full force
and effect.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.18 <U>Tangible Personal Property</U>. The Company or a Subsidiary is in possession of and
have good title to, or have valid leasehold interests in or valid rights under contract to use, all
of the real and personal property used or held for use in the business of the Company or the
Subsidiaries. All such property is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable Laws.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.19 <U>Contracts</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Schedules 3.19 and 3.17 contains a true and complete list of each of the following
Contracts as of the date hereof:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all Contracts providing for a commitment of employment or consultation services for
a specified term and payments at any one time or in any one year in excess of $100,000;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all Contracts with any Person containing any provision or covenant prohibiting or
materially limiting the ability the Company or any of the Subsidiaries to engage in any
business activity or compete with any Person;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) all Contracts relating to indebtedness of the Company or any of the Subsidiaries;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all Contracts (other than this Agreement) providing for (i)&nbsp;the disposition or
acquisition of any assets or properties that individually or in the aggregate are material
to the business or any of the Subsidiaries or that contain continuing obligations of any of
the Subsidiaries, or (ii)&nbsp;any merger or other business combination involving the Company or
any of the Subsidiaries;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all Contracts (other than this Agreement) that limit or contain restrictions on the
ability of the Company or any of the Subsidiaries to incur indebtedness or incur or suffer
to exist any Lien, to purchase or sell any assets, to change the lines of business in which
it participates or engages or to engage in any merger or other business combination;


<P align="center" style="font-size: 10pt">10
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<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) all Contracts establishing any joint venture, strategic alliance or other
collaboration;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) all Contracts with any Person obligating the Company and any of the Subsidiaries
to guarantee or otherwise become directly or indirectly obligated with respect to any
liability or obligation in excess of $25,000 in each case or $100,000 in the aggregate at
any one time outstanding;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) all Contracts for the leasing of real property by the Company and any of the
Subsidiaries setting forth the address, landlord and tenant for each lease; and



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) all other Contracts that (i)&nbsp;involve the payment, pursuant to the terms of any
such Contract, by or to the Company or any of the Subsidiaries of
more than $100,000 annually, (ii)&nbsp;cannot be terminated within 90&nbsp;days after giving notice of
termination without resulting in any material cost or penalty to the Company, or (iii)&nbsp;are
material to the businesses of the Company or the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the date hereof, true, correct and complete copies of each Contract required to
be disclosed in Schedule&nbsp;3.19 have been delivered to, or made available for inspection by,
Purchaser. Each such Contract is in full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms, of the Company and the applicable
Subsidiaries and, of each other party thereto; and neither the Company nor, to the Knowledge of
Seller, any other party to such Contract, is in violation or breach of or default under any such
Contract (or with notice or lapse of time or both, would be in violation or breach of or default
under any such Contract).



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.20 <U>Tax</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company and the Subsidiaries have duly and timely filed with the appropriate taxing
authorities all material federal, state and local income Tax Returns and all other material Tax
Returns required to be filed through the date hereof and will duly and timely file any such returns
required to be filed on or prior to the Closing. Such Tax Returns and other information filed are
(and, to the extent they will be filed prior to the Closing, will be) complete and accurate in all
material respects. Neither the Company nor the Subsidiaries have pending any request for an
extension of time within which to file federal, state or local income Tax Returns.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All Taxes of the Company and the Subsidiaries in respect of periods (or portions thereof)
ending at or prior to the Closing have been paid by the Company and the Subsidiaries or such Taxes
(other than income Taxes) are shown as due and payable after the Closing on the Financial
Statements in accordance with GAAP.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;No federal, state, local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any material Taxes or material Tax Returns of the
Company or any of the Subsidiaries. Neither the Company nor any of the Subsidiaries has received a
written notice of any such pending audits or proceedings. There are no outstanding waivers
extending the statutory period of limitation relating to the payment of Taxes due from the Company
or any of the Subsidiaries.




<P align="center" style="font-size: 10pt">11
</DIV>

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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the IRS nor any other taxing authority (whether domestic or foreign) has asserted
in writing, or to the best Knowledge of the Company and the Subsidiaries, is threatening to assert,
against the Company or any of the Subsidiaries any material deficiency or material claim for Taxes
in excess of the reserves established therefor.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;There are no Liens for Taxes upon any property or assets of the Company or any of the
Subsidiaries, except for Liens for Taxes not yet due and payable and liens for Taxes that are being
contested in good faith by appropriate proceedings as set forth on Schedule&nbsp;3.20(e) and as to which
adequate reserves have been established in accordance with GAAP.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Neither the Company nor any of the Subsidiaries has any obligation under any Tax sharing
agreement or similar arrangement with any other Person with respect to Taxes of such other Person.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.21 <U>Accuracy of Statements</U>. Neither this Agreement nor any schedule, exhibit,
statement, list, document, certificate or other information furnished or to be furnished by or on
behalf of the Company or Seller to Purchaser or any representative or Affiliate of Purchaser in
connection with this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.


<P align="center" style="font-size: 10pt"><B>ARTICLE IV<BR>
REPRESENTATIONS AND WARRANTIES OF PURCHASER</B>


<P align="center" style="font-size: 10pt">Purchaser hereby represents and warrants to Seller as follows:



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Organization of Purchaser</U>. Purchaser is a limited partnership duly formed,
validly existing and in good standing under the Laws of the State of Delaware. Purchaser has full
organizational power and authority to execute and deliver this Agreement and to perform Purchaser&#146;s
obligations hereunder and to consummate the transactions contemplated hereby, including without
limitation to buy pursuant to this Agreement the Securities and issue to Seller in consideration
therefore the AREP Units.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Authority</U>. The execution and delivery by Purchaser of this Agreement, and the
performance by Purchaser of its obligations hereunder (including the issuance of the AREP Units),
have been duly and validly authorized and, no other corporate action on the part of Purchaser is
necessary. This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>No Conflicts</U>. The execution and delivery by Purchaser of this Agreement and the
issuance of the AREP Units as contemplated hereby do not, the performance by Purchaser of its
obligations under this Agreement and the consummation of the transactions contemplated hereby, will
not:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;conflict with, or result in a violation or breach of, any of the terms, conditions or
provisions of the organizational documents of Purchaser;



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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;conflict with, or result in a violation or breach of, any term or provision of any Law or
Order applicable to Purchaser or any of its Assets and Properties (other than such conflicts,
violations or breaches which will not have a Material Adverse Effect on Purchaser; or



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) (i)&nbsp;conflict with, or result in a violation or breach of, (ii)&nbsp;constitute (with or without
notice or lapse of time or both) a default under, (iii)&nbsp;require Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as a result or under
the terms of, (iv)&nbsp;result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v)&nbsp;result in the creation or imposition of
any Lien upon Purchaser or any of its Assets and Properties under, any Contract or License to which
Purchaser is a party or by which any of its Assets and Properties is bound.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Capitalization</U>. The AREP Units have been duly authorized by all required action on
the part of the Purchaser; the AREP Units, when issued and paid for in accordance with the
Agreement, will be validly issued, fully paid and nonassessable, and
will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Purchaser,
except as expressly set forth in the Agreement.



<P align="center" style="font-size: 10pt"><B>ARTICLE V</B>



<P align="center" style="font-size: 10pt"><B>COVENANTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance of Business Prior to Closing</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Seller shall cause each of the Company and the Subsidiaries from the date hereof
through the Closing Date to:




<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) conduct its operations and business according to their usual, regular and ordinary
course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) use all commercially reasonable efforts to keep its business and properties
substantially intact, including its present operation, physical facilities, working
conditions, insurance policies, and relationships with lessors, licensors, suppliers,
customers, employees;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) maintain its corporate existence;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) maintain its books and records and accounts in its usual, regular, and ordinary
manner in compliance with all applicable laws and governmental orders;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) pay and discharge when due all taxes, assessments and governmental charges imposed
upon it or any of its properties, or upon the income or project therefrom in the ordinary
course of business consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) promptly notify Purchaser of any Material Adverse Change to the Company or the
Subsidiaries; and



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<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) permit representatives of Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of the Company
and the Subsidiaries, to all premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to the Company and the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the generality of the foregoing, from the date hereof through the
Closing, Seller shall not and shall cause each of the Company and its Subsidiaries not to:




<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) engage in any transaction, or take or omit to take any action, that would result in
a breach of any representation or warranty in Article&nbsp;II and III of this Agreement;


<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) declare, set aside, or pay any dividend;

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) declare or pay any increase in compensation to any officer, director, employee or
agent of the Company or any of the Subsidiaries, except in the ordinary course consistent
with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) enter into any Contract that, had it been in effect on the date hereof, would have
been required to be listed on Schedule&nbsp;3.19, except for those Contracts entered into in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) permit, allow or suffer any of its properties, assets or rights to be subject to
any Lien other than Permitted Encumbrances;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) incur any long-term indebtedness other than under the Loan and Security Agreement,
dated November&nbsp;12, 2004, by and among Atlantic Holdings, as borrower, ACE, as guarantor, and
Fortress Credit Corp., as lender, and related documents;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) make any material capital expenditure or commitment, other than for emergency
repairs or replacement, except for those capital expenditures or commitments made in the
ordinary course consistent with past practice;



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) terminate, materially modify, assign, or materially amend any Contract required
to be listed on Schedule&nbsp;3.19, except in the ordinary course consistent with past practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Efforts to Consummate Transaction</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;From the date hereof through the Closing Date, upon the terms and subject to the
conditions set forth in this Agreement, each of the parties shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. The parties will use their
commercially reasonable efforts and cooperate with one another (i)&nbsp;in promptly determining whether
any filings are required to be made or consents, approvals, waivers,



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<P align="left" style="font-size: 10pt">licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would result in a Material
Adverse Effect on the Company or the Subsidiaries or an event of default, termination or
acceleration of any agreement or any put right under any agreement) under any applicable Law or
regulation or from any Governmental or Regulatory Authority or third parties, and (ii)&nbsp;in promptly
making any such filings, in furnishing information required in connection therewith and in timely
seeking to obtain any such consents, approvals, permits or authorizations. For purposes of this
Section&nbsp;5.2, Seller shall not be obligated to make any payment to any third party as a condition to
obtaining such party&#146;s consent or approval, other than for required filing fees.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;As promptly as practicable following the date hereof: (i)&nbsp;Purchaser shall take all action
necessary to call, give notice of and hold a meeting (the &#147;Meeting&#148;) of the holders of AREP Units
to vote on the matters described in Sections&nbsp;8.5 and 8.7 hereof (the &#147;Proposals&#148;); and (ii)
Purchaser shall prepare and file with the SEC, a proxy or information statement (the &#147;Statement&#148;)
of Purchaser to be sent to the holders of AREP Units in connection with the Meeting. Purchaser
shall use commercially reasonable efforts to cause the Statement to comply with the rules and
regulations promulgated by the SEC and to respond promptly to any comments of the SEC or its staff. Each of such Proposals, and all Statements and other
documents relating thereto, shall be in form and substance reasonably acceptable to Purchaser,
Seller, Barberry Corp. and High Coast Limited Partnership. Each of Barberry Corp. and High Coast
Limited Partnership hereby agrees to vote all of its AREP Units in favor of the Proposals at the
Meeting. Notwithstanding the foregoing, to the extent practicable, the parties shall take all
necessary and appropriate action to cause the Proposals to be approved without a meeting of the
holders of AREP Units in accordance with applicable law.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;From the date hereof through the Closing Date, Seller shall give prompt written notice to
Purchaser of: (i)&nbsp;any occurrence, or failure to occur, of any event which occurrence or the
failure would reasonably be expected to cause any representation or warranty of any of the Seller
contained in this Agreement, if made on or as of the date of such event or as of the Closing Date,
to be untrue or inaccurate, except for changes permitted by this Agreement and except to the extent
that any representation and warranty is made as of a specified date, in which case, such
representation and warranty shall be true, complete and accurate as of such date; or (ii)&nbsp;any
failure of the Seller, the Company, the Subsidiaries or any officer, general partner, director,
employee, consultant or agent of the Seller, the Company or the Subsidiaries, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by it or them under
this Agreement; provided, however, that no such notification shall affect the representations or
warranties of the Seller or the conditions to the obligations of Purchaser hereunder.



<P align="center" style="font-size: 10pt"><B>ARTICLE VI</B>



<P align="center" style="font-size: 10pt"><B>ASSIGNMENT OF RIGHTS RELATING TO THE SECURITIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Assignment of Rights, etc</U>. Seller hereby assigns to AREP Sands Holding LLC
(&#147;Purchase Designee&#148;) (the designee of Purchaser and American Real Estate Holdings, Limited
Partnership), as of the Closing Date: (a)&nbsp;with no further action on the part of Seller or Purchaser

<P align="center" style="font-size: 10pt">15
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<P align="left" style="font-size: 10pt">all rights, claims and powers of every kind or nature that Seller had or may be deemed to have had
as of the Closing Date with respect to, arising out of or associated with, the Securities,
including, without limitation, all rights, claims and powers under or in any way relating to (i)
the GBH Registration Rights Agreement, (ii)&nbsp;the Atlantic Registration Rights Agreement and (iii)
the Warrant Agreement; and (b)&nbsp;Purchaser Designee hereby agrees to be bound by all of the
provisions of each of (i)&nbsp;the GBH Registration Rights Agreement and (ii)&nbsp;the Atlantic Registration
Rights Agreement, in each case, as contemplated by Section&nbsp;4.11 thereof.


<P align="center" style="font-size: 10pt"><B>ARTICLE VII</B>



<P align="center" style="font-size: 10pt"><B>CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Purchaser under Article&nbsp;I of this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of Seller contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be accurate, true and correct in
all material respects on and as of the Closing Date with the same force and effect as though made
by Seller on and as of the Closing Date.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Compliance by Seller</U>. Seller shall have duly performed and complied with all of
its covenants, obligations and agreements contained in this Agreement to be performed and complied
with by Seller on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Seller&#146;s Certificates</U>. Purchaser shall have received a certificate dated as of
the Closing Date executed by an authorized officer of Seller certifying as to the fulfillment and
satisfaction of the conditions set forth in Sections&nbsp;7.1 and 7.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>No Material Adverse Change</U>. No Material Adverse Change to the Company or any of
the Subsidiaries shall have occurred and no event shall have occurred which, in the reasonable
judgment of Purchaser, is reasonably likely to have a Material Adverse Effect on the Company or any
of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding by other Person shall have
been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the Company or
any of the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is
reasonably likely to result in substantial damages in respect of, any provision of the Agreement or
the consummation of the transactions contemplated hereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Registration Rights Agreement</U>. Purchaser shall have executed and delivered the
Registration Rights Agreement.


<P align="center" style="font-size: 10pt">16
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<P align="center" style="font-size: 10pt"><B>ARTICLE VIII<BR>
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Seller under Article&nbsp;I of this Agreement are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions precedent:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Warranties True as of Both Present Date and Closing Date</U>. Each of the
representations and warranties of Purchaser contained herein shall have been accurate, true and
correct on and as of the date of this Agreement, and shall also be accurate, true and correct in
all material respects on and as of the Closing Date with the same force and effect as though made
by Purchaser on and as of the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Compliance by Purchaser</U>. Purchaser shall have duly performed and complied with
its respective covenants, obligations and agreements contained in this Agreement to be performed
and complied with by Purchaser on or prior to the Closing Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Purchaser&#146;s Certificate</U>. Seller shall have received a certificate dated as of the
Closing Date executed by an authorized officer of Purchaser certifying as to the fulfillment and
satisfying the conditions set forth in Sections&nbsp;8.1 and 8.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Actions or Proceedings</U>. No action or proceeding by any Governmental Authority
shall have been instituted or threatened, and no action or proceeding
by other Person shall have been instituted, which (a)&nbsp;is reasonably likely to have a Material Adverse Effect on the Company
or any of the Subsidiaries, or (b)&nbsp;is reasonably likely to enjoin, restrain or prohibit, or is
reasonably likely to result in substantial damages in respect of, any provision of the Agreement or
the consummation of the transactions contemplated hereby.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Approval</U>. The transactions contemplated by this Agreement shall have been
approved through all depositary unit holder action required by the New York Stock Exchange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>Registration Rights Agreement</U>. Seller shall have executed and delivered the
Registration Rights Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <U>Amendment to Limited Partnership Agreement</U>. The Purchaser&#146;s amended and restated
agreement of limited partnership, dated as of May&nbsp;12, 1987, as amended, shall have been amended (i)
as necessary to consummate this transaction, (including without limitation, modification of Section
4.5(c) thereof to render such section inapplicable to any transactions approved by the audit
committee of the Purchaser), and (ii)&nbsp;such that the general partner and the limited partners, as
defined therein, may not cause Purchaser, or any successor entity of Purchaser, whether in its
current form as a limited partnership or as converted to or succeeded by a corporation or other
form of business association, to effect a merger or other business combination of Purchaser or such
successor, in each case pursuant to Section&nbsp;253 of the General Corporation Law of Delaware, or any
successor statute, or any similar short-form merger statute under the laws of Delaware or any other
jurisdiction.


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<P align="center" style="font-size: 10pt"><B>ARTICLE IX</B>



<P align="center" style="font-size: 10pt"><B>TERMINATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Termination</U>. This Agreement may be terminated at any time on or prior to the
Closing Date:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;By written notice of Seller or Purchaser, if the Closing shall not have taken place on or
before September&nbsp;30, 2005; provided, however, that the right to terminate this Agreement under this
Section&nbsp;9.1 shall not be available to any party whose willful failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or
before such date;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;By Purchaser, if there shall have been a material breach of any covenant, representation
or warranty or other agreement of Seller hereunder, and such breach shall not have been remedied
within ten Business Days after receipt by Seller of a notice in writing from Purchaser specifying
the breach and requesting such be remedied; or



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;By Seller, if there shall have been a material breach of any covenant, representation or
warranty or other agreement of Purchaser hereunder, and such breach shall not have been remedied
within ten Business Days after receipt by Purchaser of notice in writing from Seller specifying the
breach and requesting such be remedied.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Effect of Termination</U>. If this Agreement is terminated pursuant to Section&nbsp;9.1,
all obligations of the parties hereunder shall terminate, except for the obligations set forth in
Article&nbsp;X and Article&nbsp;XII, which shall survive the termination of this Agreement, and except that
no such termination shall relieve any party from liability for any prior willful breach of this Agreement.



<P align="center" style="font-size: 10pt"><B>ARTICLE X<BR>
INDEMNIFICATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 <U>Indemnification by Seller</U>. Seller agrees to indemnify Purchaser, its Affiliates
and their respective officers, directors, employees, independent contractors, stockholders,
principals, partners, agents, or representatives (each an &#147;Indemnified Person&#148; and collectively,
the &#147;Indemnified Persons&#148;) against, and to hold each Indemnified Person harmless from, any and all
Losses incurred or suffered by any Indemnified Person relating to or arising out of or in connection with (a)&nbsp;any breach of or
any inaccuracy in any representation or warranty made by Seller in this Agreement, (b)&nbsp;any breach
of or failure by any Seller to perform any of its covenants or obligations set out or contemplated
in this Agreement, (c)&nbsp;after giving effect to the exchange offer pursuant to which the 3% Notes due
2008 (CUSIP 048416AA9) (the &#147;Notes&#148;) issued by Atlantic Holdings were issued (the &#147;Exchange Offer&#148;)
through the date hereof, (i)&nbsp;any failure by the Company or any of its Subsidiaries to own assets
with a fair market value in excess of its liabilities, (ii)&nbsp;the inability of the Company or any of
its Subsidiaries to pay its debts as they become due, or (iii)&nbsp;the maintenance by the Company or
any of its Subsidiaries of unreasonably small capital, (d)&nbsp;the Exchange Offer, (e)&nbsp;any claim by or
on behalf of holders of the 11% Notes

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<P align="left" style="font-size: 10pt">due 2005 issued by GB Property Funding Corp. challenging the
validity or priority of the liens securing the Notes, or (f)&nbsp;any restructuring transaction, from
and after the date hereof, whereby obligations of GB Property Funding Corp. are assumed or paid by
Atlantic Holdings, in the case of clauses (c)&nbsp;through (f)&nbsp;only to the extent such Losses relate to
the Securities acquired by Purchaser pursuant to this Agreement.<U> </U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 <U>Claims</U>. As promptly as is reasonably practicable after becoming aware of a claim
for indemnification under this Agreement, the Indemnified Person shall promptly give notice to the
Seller (&#147;Indemnifying Person&#148;) of such claim and the amount the Indemnified Person will be entitled
to receive hereunder from the Indemnifying Person; provided that the failure of the Indemnified
Person to promptly give notice shall not relieve the Indemnifying Person of its obligations except
to the extent (if any) that the Indemnifying Person shall have been prejudiced thereby. If the
Indemnifying Person does not object in writing to such indemnification claim within 30&nbsp;days of
receiving notice thereof, the Indemnified Person shall be entitled to recover, on the thirty-fifth
day after such notice was given, from the Indemnifying Person the amount of such claim, and no
later objection by the Indemnifying Person shall be permitted; if the Indemnifying Person agrees
that it has an indemnification obligation but objects that it is obligated to pay only a lesser
amount, the Indemnified Person shall nevertheless be entitled to recover, on the thirty-fifth day
after such notice was given, from the Indemnifying Person the lesser amount, without prejudice to
the Indemnified Person&#146;s claim for the difference. In addition to the amounts recoverable by the
Indemnified Person from the Indemnifying Person pursuant to the foregoing provisions, the
Indemnified Person shall also be entitled to recover from the Indemnifying Person interest on such
amounts at the rate of Two Times Prime from, and including, the thirty-fifth day after such notice
of an indemnification claim is given to, but not including, the date such recovery is actually made
by the Indemnified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 <U>Notice of Third Party Claims; Assumption of Defense</U>. The Indemnified Person
shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any suit, action or proceeding, by any Person not a
party hereto (a &#147;Third Party Claim&#148;) in respect of which indemnity may be sought under this
Agreement; provided that the failure of the Indemnified Person to promptly give notice shall not
relieve the Indemnifying Person of its obligations except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person may, at its own
expense, participate in the defense of any Third Party Claim, suit, action or proceeding (a)&nbsp;upon
notice to the Indemnified Person and (b)&nbsp;upon delivery by the Indemnifying Person to the
Indemnified Person a written agreement that the Indemnified Person is entitled to indemnification
for all Losses arising out of such Third Party Claim, suit, action or proceeding and that the Indemnifying Person shall be liable for the entire amount of
any Loss, at any time during the course of any such Third Party Claim, suit, action or proceeding,
assume the defense thereof; provided, however, that (i)&nbsp;the Indemnifying Person&#146;s counsel is
reasonably satisfactory to the Indemnified Person, and (ii)&nbsp;the Indemnifying Person shall
thereafter consult with the Indemnified Person upon the Indemnified Person&#146;s reasonable request for
such consultation from time to time with respect to such Third Party Claim, suit, action or
proceeding. If the Indemnifying Person assumes such defense, the Indemnified Person shall have the
right (but not the duty) to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by the Indemnifying
Person&#146;s counsel of both the Indemnifying Person and the Indemnified Person would present such
counsel with a

<P align="center" style="font-size: 10pt">19
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<P align="left" style="font-size: 10pt">conflict of interest, then such Indemnified Person may employ separate counsel to
represent or defend it in any such Third Party Claim, action, suit or proceeding and the
Indemnifying Person shall pay all of the fees and disbursements in connection with the retention of
such separate counsel. If the Indemnifying Person fails to promptly notify the Indemnified Party
that the Indemnifying Party desires to defend the Third Party Claim pursuant, or if the
Indemnifying Person gives such notice but fails to prosecute vigorously and diligently or settle
the Third Party Claim, then the Indemnified Party will have the right to defend, at the sole cost
and expense of the Indemnifying Person, the Third Party Claim by all appropriate proceedings, which
proceedings will be prosecuted by the Indemnifying Person in good faith or will be settled at the
discretion of the Indemnifying Person (with the consent of the Indemnifying Person, which consent
will not be unreasonably withheld). The Indemnifying Person will have full control of such defense
and proceedings, including any compromise or settlement thereof. Whether or not the Indemnifying
Person chooses to defend or prosecute any such Third Party Claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 <U>Settlement or Compromise</U>. Any settlement or compromise made or caused to be made
by the Indemnified Person or the Indemnifying Person, of any claim, suit, action or proceeding
shall also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be,
in the same manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise thereof; provided, however, that no
obligation, restriction or Loss shall be imposed on the Indemnified Person as a result of such
settlement without its prior written consent. The Indemnified Person will give the Indemnifying
Person at least 30&nbsp;days&#146; notice of any proposed settlement or compromise of any Third Party Claim,
suit, action or proceeding it is defending, during which time the Indemnifying Person may reject
such proposed settlement or compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and complete liability and
responsibility for such Third Party Claim, suit, action or proceeding and any and all Losses in
connection therewith in excess of the amount of unindemnifiable Losses which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5 <U>Failure of Indemnifying Person to Act</U>. In the event that the Indemnifying Person does not assume the defense of any Third Party
Claim, suit, action or proceeding brought against an Indemnified Person, then any failure of the
Indemnified Person to defend or to participate in the defense of any such Third Party Claim, suit,
action or proceeding or to cause the same to be done, shall not relieve the Indemnifying Person of
any of its obligations under this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.6 <U>Tax Character</U>. Seller and Purchaser agree that any payments pursuant to this
Article&nbsp;X will be treated for federal and state income tax purposes as adjustments to the Purchase
Price of the Securities, and that they will report such payments on all Tax Returns consistently
with such characterization.


<P align="center" style="font-size: 10pt"><B>ARTICLE XI<BR>
DEFINITIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 Definitions. <U>Defined Terms</U>. As used in this Agreement, the following defined
terms have the meanings indicated below:


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Ace&#148; has the meaning ascribed to it in Section&nbsp;3.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Affiliate&#148; means, with respect to any specified Person, any other Person that, directly or
indirectly, owns or controls, is under common ownership or control with, or is owned or controlled
by, such specified Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Agreement&#148; has the meaning ascribed to it in the recitals.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREH&#148; means American Real Estate Holdings Limited Partnership, a Delaware limited
partnership.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;AREP
Units&#148; has the meaning ascribed to it in Section&nbsp;1.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Assets and Properties&#148; of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or intangible, and
wherever situated), including the goodwill related thereto, operated, owned or leased by such
Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Atlantic Holdings&#148; has the meaning ascribed to it in Section&nbsp;3.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Atlantic Registration Rights Agreement&#148; means that certain Registration Rights Agreement,
dated as of July&nbsp;22, 2004, by and between Atlantic Coast Entertainment Holdings, Inc. and the other
signatories thereto, a copy of which is attached hereto as <U>Exhibit&nbsp;B</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Audited Financial Statements&#148; means the audited financial statements of the Company and
Atlantic Holdings as of December&nbsp;31, 2003, consisting of the balance sheet at such date and the
related statements of operations, statement of members&#146; equity, and cash flows for the year then
ended, each accompanied by the audit report of KPMG LLP, independent public auditors with respect
to the Company and Atlantic Holdings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business Day&#148; means any day of the year other than (i)&nbsp;any Saturday or Sunday or (ii)&nbsp;any
other day on which commercial banks located in New York City are generally closed for business.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Business or Condition&#148; of any Person means the business, condition (financial or otherwise),
properties, assets or results of operations or prospects of such Person, taken as a whole.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLA&#148; means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any successor statutes and any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CERCLIS&#148; means the Comprehensive Environmental Response, Compensation and Liability
Information System List.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing&#148; has the meaning ascribed to it in Section&nbsp;1.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Date&#148; has the meaning ascribed to it in Section&nbsp;1.3.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing
Consideration&#148; has the meaning ascribed to it in Section&nbsp;1.2.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company&#148; means GB Holdings, Inc., a Delaware corporation.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contingent
Consideration&#148; has the meaning ascribed to it in
Section&nbsp;1.5(b).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contract&#148; means any contract, lease, commitment, understanding, sales order, purchase order,
agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan, permit or license,
whether written or oral, which is intended or purports to be binding and enforceable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Dollars&#148; or numbers proceeded by the symbol &#147;$&#148; means amounts in United States Dollars.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;DTC&#148; has the meaning ascribed to it in Section&nbsp;1.4.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;EBITDA
Statements&#148; has the meaning ascribed to it in Section&nbsp;1.5(a).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Claim&#148; means any third party (including, without limitations, governmental
agencies and employees) action, lawsuit, claim or proceeding (including claims or proceedings under
OSHA or similar laws relating to safety of employees) that seeks to impose liability for (a)
pollution or contamination of the ambient air, surface water, ground water or land; (b)&nbsp;solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation; (c)
exposure to hazardous or toxic substances; (d)&nbsp;the safety or health of employees; or (e)&nbsp;the
transportation, processing, distribution in commerce, use or storage of hydrocarbons or chemical
substances. An Environmental Claim includes, but is not limited to, a common law action, as well
as a proceeding to issue, modify or terminate an Environmental Permit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Law&#148; means any law, rule, regulation or order of other requirements of law
(including common law) any federal, foreign, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority with jurisdiction over the Company or any
of the Subsidiaries or any of their respective properties or assets that relates to (a)&nbsp;pollution
or protection of human health, natural resources and the environment, including ambient air,
surface water, ground water or land; (b)&nbsp;solid, gaseous or liquid waste generation, treatment,
storage, disposal or transportation; (c)&nbsp;exposure to Hazardous Materials; (d)&nbsp;the safety or health
of employees; or (e)&nbsp;regulation of the manufacture, processing, distribution in commerce, use or
storage of Hazardous Materials, including hydrocarbons or chemical substances. Environmental Laws
include but are not limited to OSHA, CERCLA, the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as
amended, the Safe Drinking Water Act, as amended, the Superfund Amendments and Reauthorization Act
of 1986 (&#147;SARA&#148;), as amended, the Resource Conservation and Recovery Act of 1976 (&#147;RCRA&#148;), as
amended, the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances
Control Act, as amended, the Oil Pollution Act of 1990 (&#147;OPA&#148;), as amended, the Hazardous Materials
Transportation Act, as amended, and any other federal, foreign, state and local law whose purpose
is to conserve or protect human health, the environment, wildlife or natural resources.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Environmental Permit&#148; means any permit, license, approval or other authorization under any
Environmental Law, applicable law, regulation and other requirement of the United States or any
foreign country or of any state, municipality or other subdivision thereof relating to pollution or
protection of health or the environment, including laws, regulations or other requirements


<P align="center" style="font-size: 10pt">22
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">relating
to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous
substances or toxic materials or wastes into ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical subsidiaries, pollutants, contaminants or
hazardous or toxic materials or wastes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;EBITDA&#148; shall mean, for any period, as certified by Atlantic Holdings&#146; independent auditors
and Chief Financial Officer, the Consolidated Net Income for such period plus the following to the
extent deducted in calculating such Consolidated Net Income: (i)&nbsp;Consolidated Interest Expense,
(ii)&nbsp;provision for all taxes based on income, profits or capital and (iii)&nbsp;depreciation and
amortization (including but not limited to amortization of goodwill and intangibles). For purposes
of determining EBITDA, allocations of expenses shall be made on a basis consistent with past
practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the foregoing:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Consolidated Net Income&#148; means, for any period, the net income (loss)&nbsp;of
Atlantic Holdings and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP; <U>provided</U> that there shall not be included in such
Consolidated Net Income:



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any net income (loss)&nbsp;of any Person acquired by Atlantic Holdings
or a Subsidiary in a transaction accounted for in a manner similar to a
pooling of interests for any period prior to the date of such acquisition,



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) any gain or loss realized upon the sale or other disposition of
any asset of Atlantic Holdings or any Subsidiary (including pursuant to any
sale/leaseback transaction) that is not sold or otherwise disposed of in the
ordinary course of business;



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) any item classified as an extraordinary, unusual or nonrecurring
gain, loss or charge;



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the cumulative effect of a change in accounting principles;



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) any unrealized gains or losses in respect of any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
(including derivative agreements or arrangements);



<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) any unrealized foreign currency translation gains or losses in
respect of indebtedness denominated in a currency other than the functional
currency of such debtor.

<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Consolidated Interest Expense&#148; means, for any period, the total interest
expense of Atlantic Holdings and its Subsidiaries to the extent deducted in
calculating Consolidated Net Income, net of any interest income of Atlantic
Holdings and its Subsidiaries, including but not limited to any such interest
expense consisting of (<U>a</U>) interest expense attributable to an obligation
that is required to be classified and accounted for as a capitalized lease for
financial

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">reporting purposes in accordance with GAAP, (<U>b</U>) amortization of
debt discount, (<U>c</U>) the interest portion of any deferred payment obligation,
and (<U>d</U>) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers&#146; acceptance financing, as determined on a
consolidated basis in accordance with GAAP; <U>provided</U> that gross interest
expense shall be determined after giving effect to any net payments made or
received by Atlantic Holdings and its Subsidiaries with respect to any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement or other similar agreement or
arrangement (including derivative agreements or arrangements), and <U>further
provided</U> that to avoid double counting, amortization of any item shall not be
included in the calculation of Consolidated Interest Expense if it is already to be
included in the calculation of EBITDA.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ERISA&#148; means the Employee Retirement Income Security Act of 1974, as amended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Exchange
Offer&#148; has the meaning ascribed to it in Section&nbsp;10.1.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Financial Statements&#148; means the Audited Financial Statements and the Interim 2004 Financial
Statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GAAP&#148; means U.S. generally accepted accounting principles at the time in effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GBH Registration Rights Agreement&#148; means that certain Stock Purchase Agreement, dated as of
September&nbsp;29, 2000, by and between GB Holdings, Inc. and Cyprus, LLC with respect to 4,625,000
shares of common stock of GB Holdings, Inc., a copy of which is attached hereto as <U>Exhibit
A</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Governmental or Regulatory Authority&#148; means any court, tribunal, arbitrator, authority,
administrative or other agency, commission, authority, licensing board official or other
instrumentality of the United States or any state, county, city or other political subdivision.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Hazardous Material&#148; means (a)&nbsp;any &#147;hazardous substance,&#148; as defined by CERCLA; (b)&nbsp;any
&#147;hazardous waste&#148; or &#147;solid waste,&#148; in either case as defined by the Resource Conservation and
Recovery Act, as amended; (c)&nbsp;any hazardous, dangerous or toxic chemical, material, waste or
substance, regulated by any Environmental Law; (d)&nbsp;any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof; (e)&nbsp;any asbestos-containing
materials in any form or condition; (f)&nbsp;any polychlorinated biphenyls in any form or condition; (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof; (h)&nbsp;any air pollutant
which is so designated by the U.S. Environmental Protection Agency as authorized by the Clean Air Act; or (i)&nbsp;any mold or microbial/microbiological contaminants that pose a
risk to human health or the environment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnified Person&#148; has the meaning ascribed to it in Section&nbsp;10.1.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnifying Person&#148; has the meaning ascribed to it in Section&nbsp;10.2.


<P align="center" style="font-size: 10pt">24
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Instruction Letter&#148; means the letter in the form attached hereto as <U>Exhibit&nbsp;C</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Interim 2004 Financial Statements&#148; means the unaudited internal financial statements of the
Company for the nine months ended September&nbsp;30, 2004, consisting of the balance sheet at such date
and the related statements of operations for the period then ended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Knowledge&#148; means, with respect to the Seller, the Company and/or the Subsidiaries, in each
case the knowledge of any director, officer, senior executive, partner or member of Seller, Company
or any Subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Laws&#148; means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of the United States or any state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;License&#148; means licenses, permits, certificates of authority, authorizations, approvals,
registrations, findings of suitability, variances, exemptions, certificates of occupancy, orders,
franchises and similar consents granted or issued by any Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lien&#148; means any mortgage, lien (except for any lien for Taxes not yet due and payable),
charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any
third party, easement, encroachment, encumbrance or other adverse claim of any kind or description.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Loss&#148; or &#147;Losses&#148; means any and all liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including attorneys&#146; fees and expenses and costs of
investigation and litigation).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Material Adverse Effect&#148; or &#147;Material Adverse Change,&#148; as to any Person, means a material
adverse change (or circumstance involving a prospective change) in the Business or Condition of
such Person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Meeting&#148;
has the meaning ascribed to it in Section&nbsp;5.2(b).

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Notes&#148;
has the meaning ascribed to it in Section&nbsp;10.1.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Order&#148; means any writ, judgment, decree, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;OSHA&#148; means the Occupational Safety and Health Act, as amended, or any successor statute, and
any regulations promulgated thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Permitted Encumbrances&#148; means, as applicable,


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;any liens for taxes and assessments not yet delinquent as of the Closing Date;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any obligations or duties affecting any assets or property to any municipality or public
authority with respect to any franchise, grant, license or permit, and all applicable laws, rules
and orders of Governmental or Regulatory Authority;



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;encumbrances securing payments to mechanics and material men and encumbrances attributable
to any assets or property securing payment of taxes or assessments

<P align="center" style="font-size: 10pt">25
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">that are, in either case, not
yet delinquent or, if delinquent, are being contested in good faith in the normal course of
business; and

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;all encumbrances, restrictions, exceptions, limitations and liens contemplated, created
and described in those documents listed on Schedule&nbsp;3.19(a)(iii), and all documents executed in
connection therewith.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Person&#148; means any natural person, corporation, limited liability company, general
partnership, limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Plans&#148; shall mean all material pension and profit sharing, retirement and post retirement
welfare benefit, health insurance benefit (medical, dental and vision), disability, life and
accident insurance, sickness benefit, vacation, employee loan and banking privileges, bonus,
incentive, deferred compensation, workers compensation, stock purchase, stock option, phantom stock
and other equity-based, severance, employment, change of control or fringe benefit plans, programs,
arrangements or agreements, whether written or oral, including any employee benefit plans defined
in Section&nbsp;3(3) of ERISA., maintained or contributed to by the Company or any of the Subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proposal&#148;
has the meaning ascribed to it in Section&nbsp;5.2(b).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Purchase Price&#148; has the meaning ascribed to it in Section&nbsp;1.2.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Purchaser&#148; has the meaning ascribed to it in the recitals.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Purchaser Designee&#148; has the meaning ascribed to it in Section&nbsp;6.1.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Registration Rights Agreement&#148; means the Registration Rights Agreement between Purchaser,
Seller, and the other parties thereto, in substantially the form attached hereto as Exhibit&nbsp;D.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Seller&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SEC&#148;
has the meaning ascribed to it in Section&nbsp;3.14.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Securities&#148; has the meaning ascribed to it in the recitals.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Statement&#148;
has the meaning ascribed to it in Section&nbsp;5.2(b).



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Subsidiaries&#148; means Atlantic Holdings and Ace.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Tax Return&#148; means any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect
to Taxes, including attachments thereto and amendments thereof, and including, without limitation,
information returns, any documents with respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.


<P align="center" style="font-size: 10pt">26
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Taxes&#148; means any and all taxes, charges, fees, levies, duties, liabilities, impositions or
other assessments, including, without limitation, income, gross receipts, profits, excise, real or
personal property, environmental, recapture, sales, use, value-added, withholding, social security,
retirement, employment, unemployment, occupation, service, license, net worth, payroll, franchise,
gains, stamp, transfer and recording taxes, fees and charges, imposed by the Internal Revenue
Service (&#147;IRS&#148;) or any other taxing authority (whether domestic or foreign including, without limitation,
any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term shall include any
interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies, duties, liabilities,
impositions or other assessments.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Third Party Claim&#148; has the meaning ascribed to it in Section&nbsp;10.3.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Two Times Prime&#148; means two times the prime rate published by Citibank, N.A.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Warrant Agreement&#148; means that certain Warrant Agreement, dated as of July&nbsp;22, 2004, between
Atlantic Coast Entertainment Holdings, Inc. and American Stock Transfer and Trust Company.


<P align="center" style="font-size: 10pt"><B>ARTICLE XII<BR>
MISCELLANEOUS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 <U>Investigation</U>. It shall be no defense to an action for breach of this Agreement
that Purchaser or its agents have (or have not) made investigations into the affairs of the Company
or that the Company or Seller could not have known of the misrepresentation or breach of warranty.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 <U>Survival of Representations and Warranties</U>. The representations and warranties
of the parties hereunder shall survive the Closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 <U>Entire Agreement</U>. This Agreement, including the schedules and exhibits hereto,
which are incorporated herein and made an integrated part hereof, constitutes the entire agreement
between the parties hereto and supersedes any and all prior discussions and agreements between the
parties relating to the subject matter hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 <U>Waiver</U>. Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5 <U>Amendment</U>. This Agreement may be amended, supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto.


<P align="center" style="font-size: 10pt">27
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6 <U>No Third Party Beneficiary</U>. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third party beneficiary rights upon
any other Person, except that each Indemnified Persons shall be a third party beneficiary of
Article&nbsp;X.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7 <U>Assignment; Binding Effect</U>. No party may assign this Agreement or any right,
interest or obligation hereunder without the prior written consent of the other Parties. This
Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8 <U>Headings</U>. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9 <U>Invalid Provisions</U>. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or obligations of any
party hereto under this Agreement will not be materially and adversely affected thereby, (a)&nbsp;such
provision will be fully severable, (b)&nbsp;this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof, and (c)&nbsp;the
remaining provisions of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance here from.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.10 <U>Governing Law</U>. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the conflicts of laws principles
thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.11 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will constitute one and the
same instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.12 <U>Waiver of Jury Trial</U>. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST ANY OTHER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR
THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN. No party to
this Agreement shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of, this Agreement or any related instruments or
the relationship between the parties. No party will seek to consolidate any such action in which a jury trial has been waived with any other action in
which a jury trial cannot be or has not been waived. THE PROVISIONS OF THIS SECTION HAVE BEEN
FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS
SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.13 <U>Consent to Jurisdiction</U>. Each party irrevocably submits to the exclusive
jurisdiction of any NY State Court in the County of New York or any courts of the United States of
America located in the Southern District of New York, and each party hereby agrees that all


<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">suits,
actions and proceedings brought by such party hereunder shall be brought in any such court. Each
party irrevocably waives, to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding brought in any
such court, any claim that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum and the right to object, with respect to any such suit, action or
proceeding brought in any such court, that such court does not have jurisdiction over such party or
the other party. In any such suit, action or proceeding, each party waives, to the fullest extent
it may effectively do so, personal service of any summons, complaint or other process and agrees
that the service thereof may be made by any means permitted by Section&nbsp;0 (other than facsimile
transmission). Each party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.14 <U>Expenses</U>. All expenses, costs and fees in connection with the transactions
contemplated hereby (including fees and disbursements of counsel, consultants and accountants)
incurred by (a)&nbsp;Seller shall be paid and borne exclusively by Seller, and (b)&nbsp;Purchaser shall be
paid and borne exclusively by Purchaser. Notwithstanding the foregoing, if this Agreement is
terminated prior to the Closing and such termination results from any breach by Seller or
Purchaser, as the case may be, of any representation, warranty or covenant by such party, then such
breaching party shall reimburse the non-breaching party for all such expenses, fees and cash,
including for all expenses, fees and cash incurred in connection with obtaining high yield or other
financing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.15 <U>Notices</U>. All notices, request, demands and other communications hereunder shall
be in writing and shall be delivered personally, by certified or registered mail, return receipt
requested, and postage prepaid, by courier, or by facsimile transmission, addressed as follows:

<P align="left" style="font-size: 10pt; margin-left: 9%">If to Seller:

<P align="left" style="font-size: 10pt; margin-left: 9%">c/o Icahn Associates Corp.<BR>
767 Fifth Avenue, Suite&nbsp;4700<BR>
New York, NY 10153

<P align="left" style="font-size: 10pt; margin-left: 9%">If to Purchaser:

<P align="left" style="font-size: 10pt; margin-left: 9%">American Real Estate Partners, L.P.<BR>
100 South Bedford Rd.<BR>
Mt. Kisco, NY 10549

<P align="left" style="font-size: 10pt; margin-left: 9%">With a copy to:

<P align="left" style="font-size: 10pt; margin-left: 9%">Debevoise &#038; Plimpton LLP<BR>
919 Third Avenue<BR>
New York, NY 10022<BR>
Attention: William D. Regner


<P align="left" style="font-size: 10pt">or to such other address as a party may from time to time designate in writing in accordance with
this Section. Each notice or other communication given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been received (a)&nbsp;on the Business Day


<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">it is
sent, if sent by personal delivery, (b)&nbsp;the earlier of receipt of three Business Days after having
been sent by certified or registered mail, return receipt requested and postage prepaid, (c)&nbsp;on the
Business Day it is sent, if sent by facsimile transmission and an activity report showing the
correct facsimile number of the party on whom notice is served and the correct number of pages
transmitted is obtained by the sender (provided, however, that such notice or other communication
is also sent by some other means permitted by this Section&nbsp;12.15, or (d)&nbsp;on the first Business Day
after sending, if sent by courier or overnight delivery.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.16 <U>Further Assurances</U>. Each of the parties hereto covenants and agrees that, from
time to time subsequent to Closing, it will, at the request of the other party, execute and deliver
(or, in the case of Purchaser, cause AREH or Purchaser Designee to execute and deliver) all such
documents, including, without limitation, all such additional conveyances, transfers, consents and
other assurances and do all such other acts and things as such other party may from time to time
request be executed or done in order to better evidence, perfect or
effect any provision of this
Agreement, or of any agreement or other document executed pursuant to this Agreement, or any of the
respective obligations intended to be created hereby or thereby.



<P align="center" style="font-size: 10pt"><B>&#091;Signature Page Follows&#093;</B>



<P align="center" style="font-size: 10pt">30
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<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
officer of each party hereto as of the date first above written.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Cyprus, LLC</B><BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>By: Barberry Corp., member</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Edward E. Mattner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: Authorized Signatory</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>American Real Estate Partners, L.P.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: American Property Investors, Inc., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Keith A. Meister</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Keith A. Meister<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: President and Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Acknowledged and Agreed to<BR>
(Solely for purposes of Article&nbsp;VI):</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>AREP Sands Holding LLC</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: American Real Estate Holdings Limited Partnership, its sole member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By: American Property Investors, Inc., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Keith A. Meister</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Keith A. Meister<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: President and Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Purchase Agreement between Cyprus and AREP with respect to Sands Securities.&#093;



<P align="center" style="font-size: 10pt">30
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>For Purposes of Section&nbsp;5.2(b) only:</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>BARBERRY CORP</B>.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Edward E. Mattner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: Authorized Signatory</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>HIGH COAST LIMITED PARTNERSHIP</B><BR>
By: Little Meadow Corp., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
     <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Edward E. Mattner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: Authorized Signatory</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Purchase Agreement between Cyprus and AREP with respect to Sands Securities.&#093;



<P align="center" style="font-size: 10pt">31
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">GUARANTY: The undersigned hereby guarantees the payment and performance by Cyprus LLC of
all of its duties and obligations under this Agreement when due.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>Barberry Corp.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Edward E. Mattner</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade color="#000000">
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Edward E. Mattner<br></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorized Signatory</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&#091;Signature Page to the Purchase Agreement between Cyprus and AREP with respect to Sands Securities.&#093;



<P align="center" style="font-size: 10pt">32
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><U><B>Annex A</B></U>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="6" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="left"><B>Issuer</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Amount and Title of Security</B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
              <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">GB Holdings, Inc.
</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">4,121,033 shares of common
stock, par value $.01 per
share (CUSIP 36150A109)<BR>&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">Atlantic Coast Entertainment Holdings, Inc.
</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">4,121,033 Warrants exp. July
22, 2011 (CUSIP 048416119) to
purchase 1,133,284 shares of
Atlantic Holdings common stock</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="6" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>Schedule&nbsp;3.2</B><BR>
(Options, Warrants, Convertible Securities of Company or Subsidiaries)



<P align="left" style="font-size: 10pt">1. 10,000,000 Atlantic Holdings Warrants exp. July&nbsp;2011 have been issued pro rata to holders of
the common stock of the Company entitling such holders to purchase 2,750,000 shares of Atlantic
Holdings common stock, in the aggregate.



<P align="left" style="font-size: 10pt">2. 4,367,068 shares of Atlantic Holdings common stock have been reserved for issuance upon the
conversion of $66,258,970 principal amount of Atlantic Holdings&#146; 3% Notes due 2008.



<P align="center" style="font-size: 10pt">34
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U><B>Exhibit&nbsp;A</B></U><BR>
&#091;GBH Registration Rights Agreement&#093;




<P align="center" style="font-size: 10pt">35
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U><B>Exhibit&nbsp;B</B></U><BR>
&#091;Atlantic Registration Rights Agreement&#093;



<P align="center" style="font-size: 10pt">36
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><U><B>Exhibit&nbsp;C</B></U><BR>
(Form of Instruction Letter)



<P align="center" style="font-size: 10pt"><B>American Real Estate Holdings, Limited Partnership<BR>
American Real Estate Partners, L.P.</B><BR>
100 South Bedford Road<BR>
Mt. Kisco, New York 10549



<P align="center" style="font-size: 10pt">&#091;Date&#093;



<P align="left" style="font-size: 10pt">Cyprus, LLC<BR>
c/o Icahn Associates Corp.<BR>
767 Fifth Avenue<BR>
47<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor<BR>
New York, New York 10153


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gentlemen:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Real Estate Partners, L.P. (&#147;AREP&#148;) and American Real Estate Holdings, Limited
Partnership (&#147;AREH&#148;) hereby instruct you to deliver the Securities subject of that certain Purchase
Agreement, dated as of January&nbsp;21, 2005, directly to AREP Sands Holding LLC, which entity is a
limited liability company wholly owned and controlled by AREH and designates AREP Sands Holding LLC
as their designee under Article&nbsp;VI of the Purchase Agreement.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>American Real Estate Partners, L.P.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">American Property Investors, Inc., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:<BR>
Title:</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>American Real Estate Holdings Limited Partnership</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">American Property Investors, Inc., its general partner</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:<BR>
Title:</TD>
</TR>
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<P align="center" style="font-size: 10pt">37
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<P align="center" style="font-size: 10pt"><U><B>Exhibit&nbsp;D</B></U>



<P align="center" style="font-size: 10pt"><U>&#091;Form&nbsp;Of Registration Rights Agreement&#093; </U>




<P align="center" style="font-size: 10pt">38
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