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<SEC-DOCUMENT>0001144204-06-037468.txt : 20060908
<SEC-HEADER>0001144204-06-037468.hdr.sgml : 20060908
<ACCEPTANCE-DATETIME>20060907174415
ACCESSION NUMBER:		0001144204-06-037468
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20060907
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20060908
DATE AS OF CHANGE:		20060907

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:		061080054

	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>v052296_8k.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNITED
      STATES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
      AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WASHINGTON,
      D.C. 20549</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">------------------------------------------------------------------</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FORM
      8-K</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT
      REPORT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to Section 13 or 15(d) of the</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
      Exchange Act of 1934</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      Report (Date of Earliest Event Reported): September 7, 2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>American
      Real Estate Partners, L.P.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">---------------------------------------------------------------</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      name of registrant as specified in its charter)</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1-9516</strong></font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13-3398766</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                or other jurisdiction of incorporation)</font></div>
            </td>
            <td valign="top" width="34%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                File Number)</font></div>
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            <td valign="middle" width="33%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                Employer</font></div>
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                No.)</font></div>
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                Fifth Avenue, Suite 4700, New York, NY</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 15pt">&#160;</font></div>
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                of principal executive offices)&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 15pt">&#160;</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font size="2">(Zip
                Code)</font></div>
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      telephone number, including area code: </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(212)
      702-4300</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>N/A</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">--------------------------------------------------------------------------------</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Former
      name or former address, if changed since last report)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
              ]</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
                communication pursuant to Rule 425 under the Securities Act (17 CFR
                230.425)</font></div>
            </td>
          </tr>

      </table>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
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                ]</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))</font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      1 - Registrant&#8217;s Business and Operations</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 90pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
      - </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Entry
      into a Material Definitive Agreement.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 7, 2006, we and our 99% subsidiary, American Real Estate Holdings
      Limited Partnership, entered into an Exclusivity Agreement and Letter of Intent,
      or the Letter, with Riata Energy, Inc., relating to a potential transaction
      pursuant to which Riata would obtain an option to acquire all of the issued
      and
      outstanding membership interests of NEG Oil &amp; Gas LLC, our indirect
      wholly-owned subsidiary, or the Transaction. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      consummation of the Transaction is subject to the satisfaction of several
      conditions, including the negotiation, execution and delivery of definitive
      agreements within 70 days from the date of the execution of the
      Letter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Letter sets forth certain proposed terms with respect to the Transaction,
      including a proposed purchase price of approximately $1.519 billion, which
      includes the assumption of third party debt obligations, approximately $1.025
      billion of cash and 12.8 million shares of Riata common stock. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Letter provides for a 70-day exclusivity period, during which we and certain
      of
      our affiliates have agreed not to solicit, negotiate or accept competing
      proposals.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Riata
      is
      a working interest owner&#160;and the operator of a majority of the Longfellow
      Ranch area oil and gas properties. Longfellow Ranch is the single largest oil
      and gas property owned by NEG Oil &amp;Gas.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      description set forth above is qualified in its entirety by the Letter, a copy
      of which is filed as Exhibit 10.1 to this report and incorporated by
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      8 - Other Events</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 90pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      8.01 - Other Events.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 7, 2006, we issued a joint press release with Riata, a copy of which
      is attached as Exhibit 99.1. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      9 - Financial Statements and Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 90pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01(d) Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
      10.1 - </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exclusivity
      Agreement and Letter of Intent, dated September 7, 2006, by and among American
      Real Estate Partners, L.P., American Real Estate Holdings Limited Partnership
      and Riata Energy, Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
      99.1 - </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Press
      Release, dated September 7, 2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[remainder
      of page intentionally left blank; signature page follows]</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
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              <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
              <td colspan="3" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">AMERICAN
                REAL
                ESTATE PARTNERS, L.P. </font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td width="50%">&#160;</td>
              <td colspan="3" width="50%"><font size="2">(Registrant)</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
              <td width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
              <td width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
              <td width="42%">&#160;</td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td width="50%">&#160;</td>
              <td width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
              <td colspan="2" width="46%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">American
                Property
                Investors, Inc.,<br>its General Partner</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td width="50%">&#160;</td>
              <td width="4%">&#160;</td>
              <td colspan="2" width="46%">&#160;</td>
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              <td width="4%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:
</font></td>
              <td width="42%" style="border-bottom: black thin solid;"><font size="2">/s/
                Hillel Moerman</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2" width="54%">&#160;</td>
              <td width="4%">&#160;</td>
              <td width="42%">
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                  Moerman,</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Financial Officer</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
                  Property Investors, Inc.,</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  General Partner of </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
                  Real Estate Partners, L.P.</font></div>
              </td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2" width="54%"><font size="2">Date:&#160;September 7,
                2006</font></td>
              <td width="4%">&#160;</td>
              <td width="42%">&#160;</td>
            </tr>

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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v052296_ex10-1.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
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  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Riata
      Energy, Inc.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1601
      Northwest Expressway, Suite 1600</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oklahoma
      City, OK 73118</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September
      7, 2006 </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
      Real Estate Partners, L.P.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
      Real Estate Holdings Limited Partnership</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">White
      Plains Plaza</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">445
      Hamilton Avenue - Suite 1210</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">White
      Plains, NY 10601</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Exclusivity
      Agreement and Letter of Intent</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ladies
      and Gentlemen:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      exclusivity agreement and letter of intent (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Letter</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      relates to a potential transaction among American Real Estate Partners, L.P.
      (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>AREP</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      American Real Estate Holdings Limited Partnership (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>AREH</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      and
      Riata Energy, Inc. (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Buyer</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      under
      which Buyer would obtain an option (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Option</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      to
      acquire all of the issued and outstanding membership interests of NEG Oil &amp;
Gas, LLC (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Company</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      from
      AREP O &amp; G Holdings LLC (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Seller</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      a
      wholly-owned subsidiary of AREP Oil &amp; Gas Holdings LLC, which is in turn a
      wholly-owned subsidiary of AREH (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Oil
      &amp; Gas Holdings</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      together with AREH and AREP, the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Parents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      substantially </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">on
      the
      terms and subject to the conditions set forth herein and in the term sheet
      attached hereto as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Annex
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Term
      Sheet</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For
      purposes of this Letter, the Parents shall cause Seller to take all actions
      and
      comply with all obligations set forth herein. For purposes of this Letter and
      the Term Sheet, (i) the Company shall not be deemed to include the corporate
      entity, National Energy Group, Inc. (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>NEGI</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      but
      will be deemed to include all of the issued and outstanding membership interests
      of NEG Holding LLC (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>NEG
      Holding</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      held
      by NEGI, which are to be acquired by the Company in the&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Restructuring(1)(as defined in the Term Sheet), and (ii) NEGI shall not be
      deemed to be a direct or indirect subsidiary (or, solely for purposes of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sections
      3, 5-7 and 9</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      an
      affiliate) of the Company, the Seller or the Parents. The proposed acquisition
      of all of the Company&#8217;s membership interests (including, for the avoidance of
      doubt, such membership interests of NEG Holding acquired by the Company through
      the Restructuring) is referred to herein as the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Transaction</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;.
      Except
      for the provisions of this Letter contained in the following sentence and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sections
      1, 3, 5-12 and 15</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (and
      expressly excluding </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Annex
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      hereto),
      which are intended to be binding, this Letter is a preliminary summary of
      non-binding terms concerning a possible transaction between the parties. This
      Letter is for discussion purposes only in order to facilitate discussions
      between the parties regarding a potential transaction and, except for this
      sentence and sections 1, 3, 5-12 and 15 below (and expressly excluding
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Annex
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      hereto),
      does not constitute and will not give rise to any legally binding agreement,
      obligation or duty of any kind or character including, without limitation,
      any
      agreement, obligation or duty to act reasonably, fairly or in good faith) on
      the
      part of either party or their respective affiliates, officers, directors,
      stockholders, employees or agents. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;

      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="10%">
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>As
                of July 31, 2006, NEGI&#8217;s assets, other than its membership interest in NEG
                Holding, consisted of: (i) cash and cash equivalents in the amount
                of
                approximately $3.06 million; (ii) accounts receivable from the Company
                and
                its subsidiaries under operating and management contracts (all of
                which
                will be terminated as of the closing of the Transaction) in the amount
                of
                approximately $1.4 million; (iii) a deferred tax asset in the amount
                of
                approximately $6.2 million; and (iv) other assets unrelated to oil
                and gas
                operations (including, furniture, computers, leases for office space
                and
                office equipment and similar items, but not including any information
                technology, software and data relevant to the oil and gas operations
                of
                the Company or its subsidiaries, including NEG Holding, whether or
                not on
                such computers, which will be transferred to Buyer as part of the
                Transaction). All references herein to the SEC Reports (as defined
                in
                </sup><sup><u>Section 11(c)(ii)</u></sup><sup>) and financial statements
                shall be deemed to exclude such assets of NEGI (other than NEGI&#8217;s
                membership interests in NEG Holding and such information technology,
                software and data).</sup></font></div>
            </td>
          </tr>

      </table>
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    <div>&#160;</div>
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      </div>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Payment</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Simultaneously with the execution of this Letter, Buyer is paying to Seller
      $10
      million.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Definitive
      Documentation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Following the execution of this Letter, the parties will engage in discussions
      in order to develop definitive documents (the &#8220;Definitive Documentation&#8221;) to
      reflect the matters contained herein, and such other matters as may be agreed
      between the parties. Each party is free to negotiate the Definitive
      Documentation in its sole and absolute discretion and shall have no duty or
      obligation of any kind or character to the other party hereto in such
      negotiations, including, without limitation, to act reasonably, fairly or in
      good faith. The parties expect to execute the Definitive Documentation as
      promptly as practicable and no later than 70 days from the date hereof (provided
      that the Definitive Documentation shall be acceptable to each party in its
      sole
      and absolute discretion). If the Definitive Documentation shall have been
      executed by both parties, it is the parties&#8217; mutual desire that in accordance
      with the terms and conditions of such Definitive Documentation, the Transaction
      be consummated as promptly as practicable. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>HSR</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Seller
      and Buyer will use their best efforts to: (i) file with the Federal Trade
      Commission and/or the Department of Justice, as applicable, the required
      Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>HSR
      Act</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      notification and report forms within 10 days following execution of this Letter,
      and will request expedited treatment (i.e., early termination) of such filing;
      (ii) furnish any supplemental information which may be requested in connection
      therewith as promptly as practicable; and (iii) obtain clearance under the
      HSR
      Act, either through early termination, expiration of the waiting period or
      otherwise, as soon as possible (it being understood that neither Buyer nor
      Seller shall be required to take any action with respect to selling, holding
      separate or otherwise disposing of any business or assets or conducting their
      or
      their respective subsidiaries&#8217; business in any specified manner in order to
      obtain such clearance). If the Letter is terminated, Seller and Buyer shall
      take
      all action to immediately terminate all governmental and regulatory filings
      theretofore made, including the HSR Act filing. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Transaction</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Under
      the Definitive Documentation, Buyer will have the Option, subject to the terms
      and conditions thereof, for a period from the date hereof until the End Date
      (or
      the Extended End Date, as the case may be), to purchase all of the issued and
      outstanding membership interests of the Company, for an aggregate consideration
      of $1.519 billion, which will consist of (i) the $10 million delivered upon
      execution of this Letter, (ii) at the closing of the Transaction (the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Closing</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      $1.015 billion in immediately available funds and 12,842,000 shares of Buyer
      common stock, (iii) the Company and its subsidiaries shall have no more than
      $300 million in third party debt obligations (consisting of borrowings under
      the
      Company&#8217;s Credit Facility with Citicorp USA, Inc. and Bear Stearns Corporate
      Lending Inc., dated as of December 20, 2005 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Credit
      Facility</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;))
      at
      Closing, and (iv) the Company and its subsidiaries shall have $50 million of
      cash(2)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at
      Closing (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Cash
      Amount</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).
      If,
      as of the date of the Closing (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Closing
      Date</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      (i)
      the Cash Amount is less than $50 million, then the cash portion of the purchase
      price shall be reduced by the amount of any such shortfall and (ii) the Cash
      Amount is more than $50 million, then either, at the Buyer&#8217;s option, (A) the
      cash portion of the purchase price shall be increased by the amount of any
      such
      excess or (B) the Company shall distribute such excess cash to Seller. In
      addition, if at Closing: (A) the Net Working Capital (as defined below) is
      less
      than $0 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Specified
      Target</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      then
      the cash portion of the purchase price shall be reduced by the amount of any
      shortfall; and (B) the Net Working Capital is more than the Specified Target,
      then Buyer will have the option to either: (x) adjust the aggregate cash
      consideration upwards by the amount of any excess; or (y) cause the Company
      to
      reduce the Net Working Capital to such Specified Target by distributing cash
      to
      Seller. &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Net
      Working Capital</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
shall
      mean current assets of the Company minus current liabilities of the Company,
      as
      defined by GAAP (and consistent, with respect to presentation, with the June
      30
      Financials (as hereafter defined)), excluding receivables or payables due to
      or
      from AREP or its affiliates which are being eliminated by the Parents as part
      of
      the Transaction, cash and all liabilities and obligations relating to the
      Company&#8217;s or its Subsidiaries&#8217; hedging contracts and any other derivative
      financial instruments,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and the
      Company and its subsidiaries shall have been operating in the ordinary course
      consistent with past practice</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to net working capital items.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <hr style="COLOR: black" align="left" noshade size="1" width="10%">
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font size="2"><sup>(2)</sup></font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>For
                the avoidance of doubt, neither &#8220;cash&#8221; nor &#8220;cash equivalents&#8221; shall
                include certain items such as monies restricted in connection with
                securing bonding requirements for plugging and abandonment obligations
                or
                other similar items.</sup></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(3)</sup></font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>Unless
                the Credit Facility is paid off by Buyer as part of the Transaction,
                the
                consents, waivers and/or amendments that Buyer shall obtain from
                the
                lenders under the Credit Facility shall include consent to (i) waive
                change of control, (ii) elimination of hedges, (iii) release of the
                Stock
                and the Note (as referred to in the Restructuring) from pledges for
                distribution to Seller, and (iv) distribution of the Stock and the
                Note
                and any excess cash to Seller as a result of adjustments relating
                to cash
                or Net Working Capital at Closing. Buyer will either obtain such
                required
                consents, together with any other consents under the Credit Facility
                required in order to consummate the Restructuring and the Transaction,
                or
                pay all amounts outstanding under the Credit Facility at
                Closing.</sup></font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      Closing, Seller shall unwind the Company&#8217;s and its subsidiaries&#8217; hedging
      contracts and Seller shall retain all liabilities and obligations (or positive
      benefits and value) relating to the hedging contracts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Exclusivity</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      From
      the date hereof until the termination of this Letter (such period, the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Exclusivity
      Period</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">none
      of
      the Parents, Seller, the Company, the Company&#8217;s subsidiaries (including for
      purposes of this Letter, NEG Holding, of which the Company is the managing
      member), or any of their respective (i) directors, officers or affiliates or
      (ii) advisors, investment bankers, financial advisors, attorneys, accountants,
      consultants, agents or employees, but only in the case of clause (ii) if and
      to
      the extent authorized to act on the behalf of the foregoing for the following
      purposes (collectively, &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Representatives</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      shall
      directly or indirectly, (A) initiate, solicit, invite or facilitate any inquiry,
      proposal or offer concerning the merger or sale of any</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
      the
      assets of or equity interests in (whether by way of a single or series of direct
      purchases, mergers, or consolidations or otherwise) the Company or any of its
      subsidiaries, other than the sale of assets in the ordinary course of business
      consistent with past practice (any such inquires, or alternative offer or
      proposal, a &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Competing
      Proposal</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      or (B)
      engage or participate in any negotiations or discussions concerning (it being
      understood that a discussion consisting of a rejection of negotiations or
      discussions or a referral to someone else who provides such a rejection shall
      not be a violation of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5(a)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">),
      or
      provide access to its properties, books and records or any nonpublic information
      or data to, any person in connection with, any Competing Proposal, or execute
      or
      enter into any agreement, understanding or letter of intent with respect to, or
      accept, any Competing Proposal, in each case other than the transactions
      expressly contemplated or permitted herein;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Parents, Seller, the Company, the Company&#8217;s subsidiaries and their respective
      Representatives shall cease and terminate any and all discussions, negotiations
      and any provision of access to their properties, books and records, nonpublic
      information or data, with any person regarding any Competing Proposal (and
      shall
      promptly provide written notice to Buyer of receipt of any bona fide written
      Competing Proposal of which any of Carl Icahn, Keith Meister, Vincent Intrieri,
      Bob Alexander, Randy Cooley or Phil Devlin is aware, and the material terms
      and
      conditions thereof)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Parents, Seller, the Company and their subsidiaries and Representatives shall
      instruct NEGI and NEGI&#8217;s employees, in their capacity as managers of the Company
      or its subsidiaries (and only to the extent that NEGI and such NEGI employees
      possess or have access to confidential or non-public information of, or
      participate in the management of, the Company or its subsidiaries (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>NEGI&#8217;s
      Relevant Employees</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      and
      the Parents, Seller, the Company and their subsidiaries shall use their
      commercially reasonable efforts, consistent with applicable laws, to cause
      NEGI
      and NEGI&#8217;s Relevant Employees: (i) not to provide access to any such
      confidential or nonpublic information or data to, any person in connection
      with
      any Competing Proposal; and (ii) to cease and terminate any and all provision
      of
      access to such confidential or nonpublic information or data, with any person
      regarding any Competing Proposal; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Parents and Seller shall, and shall cause the Company, the Company&#8217;s
      subsidiaries and their respective Representatives (i) to take affirmative action
      to prevent any registration statements of NEG, Inc., the Company or any of
      the
      Company&#8217;s subsidiaries filed with the SEC prior to the date hereof that are not
      yet effective, from being amended or becoming effective (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>however</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      Seller shall not be required to withdraw any such registration statements and
      shall not be prohibited from making any amendments thereto required by the
      SEC
      in order to avoid the forced involuntary withdrawal of such registration
      statements by the SEC); (ii) not to file any such registration statements or
      similar forms or register any securities with respect to NEG, Inc. the Company
      or any of the Company&#8217;s subsidiaries with the SEC; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      the foregoing shall not apply to NEGI; and (iii) to cease all actions in
      furtherance of marketing or completing the initial public offering of NEG,
      Inc.,
      the Company or any of the Company&#8217; subsidiaries or making effective any
      registration statements, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided,</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that
      nothing in this clause (iii) will limit Seller&#8217;s right to continue internal
      preparation and discussions with its Representatives with respect to such
      registration statements so long as such actions are kept confidential.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Due
      Diligence</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In
      order for Buyer and Seller to conduct their respective business, accounting
      and
      legal due diligence review of each other (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Due
      Diligence</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      Seller and Buyer agree to provide each other with reasonable cooperation and
      access, for a period from the date hereof until the termination of this Letter,
      to all of their and their subsidiaries&#8217; respective, and in the case of Seller,
      to the Company&#8217;s and the Company&#8217;s subsidiaries&#8217; respective, properties,
      offices, books and records (including bankruptcy records), abstracts of title,
      title opinions, title files, ownership maps, lease files, assignments, division
      orders, production, drilling and imbalance reports, operating records and
      agreements, well files, financial and accounting records (including SEC
      correspondence), geological, geophysical and engineering records, contracts,
      commitments and such financial information (including work papers), operating
      data, and all other information concerning their businesses, properties,
      personnel, representatives, landlords/sublandlords, tenants, licensees and
      franchisees as Buyer or Seller, as the case may be, may request. Buyer and
      Seller and their respective subsidiaries will (and Seller will cause the Company
      and its subsidiaries to) provide each other with reasonable access and
      cooperation as necessary to facilitate their respective ongoing Due Diligence,
      including access to, among other persons, management, Representatives and
      customers; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>however</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      only management of Buyer or Seller (or the Company and its subsidiaries) may
      be
      contacted and any contact of such other persons will be coordinated through
      a
      member of management of Buyer or Seller or the Company, as applicable,
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      the Representatives, personnel and customers of Buyer or Seller (or the Company
      and its subsidiaries), as the case may be, may be contacted by the other party
      in the ordinary course of business consistent with past practice.
      Notwithstanding the foregoing, Buyer and Seller will cooperate to limit their
      respective reviews so as to avoid (i) issues under applicable antitrust rules,
      regulations and interpretations and (ii) any conflicts with the provisions
      of
      any confidentiality agreements, license agreements or other restrictive
      agreements with third parties; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      the disclosing party will take such specific actions as are reasonably requested
      by the recipient and, at the recipient&#8217;s expense if such additional fees to such
      third parties are required, seek to enter into arrangements or obtain waivers
      or
      consents that would permit the provision of information without any such
      limitations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Cooperation
      with Financing</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Parents and Seller shall, and shall cause the Company and its subsidiaries
      and
      its and their respective Representatives to use their commercially reasonable
      efforts to provide (subject to customary confidentiality agreements) and will
      request that the Company&#8217;s auditors and reserve engineers provide (at Buyer&#8217;s
      ultimate expense), reasonably necessary cooperation on a timely basis in
      connection with the arrangement of the Buyer&#8217;s equity and debt financing,
      including furnishing Buyer and its financing sources with timely financial
      information regarding the Company and the Company&#8217;s subsidiaries as shall be
      requested by Buyer (and including, with respect to any audited financial
      statements and engineering reserve reports, any consents to use the reports
      of
      the Company&#8217;s auditors and engineers thereon). In addition, the Parents and
      Seller shall request, and shall cause the Company and its subsidiaries to
      request the management of the Company to use their commercially reasonable
      efforts (i) to meet with investors in presentations, meetings, road shows and
      due diligence sessions, (ii) to provide timely assistance by providing
      information in connection with Buyer&#8217;s preparation of pro forma business
      projections, offering memorandum and similar materials (each of which shall
      be
      the sole responsibility of Buyer to prepare and approve),(4) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      (iii)
      otherwise cooperate with the marketing efforts of Buyer for any of Buyer&#8217;s
      equity and debt financing. It is a condition of the obligations set forth above
      and in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      6</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (with
      respect to both Buyer and Seller) that in requesting information and assistance
      hereunder and under </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      6</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (with
      respect to both Buyer and Seller), Buyer shall act in a commercially reasonable
      manner, including, without limitation, with respect to the amount of data and
      timing of responses requested by Buyer, and in determining whether the
      obligations set forth above and in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      6</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (with
      respect to both Buyer and Seller) have been satisfied, and in determining
      whether such parties acted reasonably or in a commercially reasonable manner,
      such parties shall not be required to &#8220;drop everything&#8221; or ignore their existing
      responsibilities to conduct their business and comply with their SEC or other
      reporting obligations. In addition, neither Parents, the Seller, the Company,
      nor their affiliates will have any liability to Buyer, its financing sources
      or
      otherwise should Buyer fail to secure adequate financing to close the
      transactions contemplated hereby.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(4)</sup></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>It
                is intended that any such forward-looking financial information,
                if
                included in materials provided to potential financing parties, will
                either
                be subject to a confidentiality agreement or be a part of consolidated
                information of Buyer (but without identifying the components thereof
                attributable to the Company or identifying the Company as the source
                thereof), and in any case, will not be included in the offering memorandum
                prepared in connection with the financing.</sup></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
      shall indemnify the Parents, Seller, Seller&#8217;s subsidiaries and the directors and
      officers of the foregoing, for any claims, liabilities and related expenses
      relating to Buyer&#8217;s equity and debt offerings pursuant to the Transaction (other
      than any such claims, liabilities and related expenses arising solely from
      information provided by such parties in writing and expressly approved by such
      parties in writing for use in a prospectus or offering memorandum). Neither
      the
      Parents nor Seller will be obligated to execute agreements with underwriters
      or
      purchasers in the Buyer&#8217;s equity and debt offerings pursuant to the Transaction
      or be responsible for any representations or indemnification thereto. The
      Definitive Documentation shall contain provisions substantially similar to
      the
      two foregoing sentences.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Transaction
      Expenses</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      party
      shall bear its own fees, costs and expenses related to the negotiation,
      investigations, due diligence and consummation of the Transaction. The
      Definitive Documentation will provide that the Parents and Seller shall be
      liable for all of their own and the Company&#8217;s, and any of its subsidiaries&#8217; or
      affiliates&#8217; transaction expenses, including fees and expenses of financial
      advisors, attorneys and other advisors</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      any transfer taxes resulting from Seller&#8217;s transfer of the Company&#8217;s membership
      interests to Buyer shall be split equally by Buyer and Seller.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Ordinary
      Course</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      From
      the date hereof, except as contemplated by and in furtherance of the
      Restructuring, the Parents and Seller will cause the Company and the Company&#8217;s
      subsidiaries to conduct their business in the ordinary course in substantially
      the same manner in which it previously has been conducted, and not to (it being
      understood and agreed that the provisions hereof shall not be applicable to
      NEGI, but will be applicable to NEG Holding and its subsidiaries):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)
      acquire (by merger, consolidation, acquisition of stock or assets or otherwise)
      or organize, any corporation, limited liability company, partnership, joint
      venture, trust or other entity or person or any business organization or
      division thereof or (ii) acquire any rights, assets or properties other than
      in
      the ordinary course of business consistent with past practice;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">amend
      or
      otherwise change the constituent or organizational documents or alter through
      merger, liquidation, reorganization, restructuring or in any other fashion
      the
      corporate structure or ownership of the Company or its
      subsidiaries;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sell,
      divest, transfer or otherwise dispose of any assets or equity interests, except
      regular sales of oil and gas sold from out of the ground or storage tanks or
      other inventories and supplies in the ordinary course of business consistent
      with past practice; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      the Company may also sell, divest, transfer or otherwise dispose of other assets
      in the ordinary course of business consistent with past practice not in excess
      in the aggregate of $100,000, or such other assets in the ordinary course of
      business consistent with past practice with the consent of Buyer not to be
      unreasonably withheld; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>further</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      the proceeds to be received from any such sale, divesture, transfer or
      disposition shall be retained for the benefit of Buyer at Closing and shall
      not
      be counted towards the Cash Amount or Net Working Capital);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">lease,
      license, sublicense, mortgage, pledge, encumber or create, incur, assume or
      cause to be subjected to any lien (other than liens securing the Credit Facility
      and immaterial liens) on, any of the assets of the Company or its subsidiaries,
      except in the ordinary course of business in accordance with past
      practice;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">other
      than to borrow against its existing credit lines for ordinary course working
      capital purposes (i) incur or modify any indebtedness for borrowed money or
      issue any debt securities or any warrants or rights to acquire any debt security
      (other than, with respect to the Company, in connection with the pending
      amendment to its bank facility), (ii) assume, guarantee or endorse or otherwise
      become responsible for, the obligations of any person, (iii) enter into any
      off-balance sheet financing arrangement or any accounts receivable or payable
      financing arrangement, or (iv) make any loans, advances or enter into any other
      financing commitments, including without limitation, any financing commitments
      or obligations to Seller or any of its affiliates (other than the Company or
      its
      subsidiaries);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">pay,
      make
      or declare any dividends or distributions (other than cash tax distributions
      and
      cash distributions pursuant to the Operating Agreement of NEG Holding dated
      May
      1, 2001)(5) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      respect of any of its equity interests; or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(g)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issue,
      grant, sell, transfer, deliver, pledge, promise, dispose of or encumber, or
      authorize the issuance, grant, sale, transfer, deliverance, pledge, promise,
      disposition or encumbrance of, or alter or modify the terms of rights or
      obligations under, any equity interests, or any options, warrants, convertible
      or exchangeable securities or other rights of any kind to acquire any equity
      interest or any other ownership interest of the Company or any of its
      subsidiaries.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Entire
      Agreement; Confidentiality; No Third Party Beneficiaries</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Letter (including the Term Sheet) and the confidentiality agreement dated as
      of
      July 18, 2006 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Confidentiality
      Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      among, Buyer, AREP and NEGI, constitutes the entire agreement between the
      parties and any of their respective affiliates and supersedes all prior
      communications, agreements and understandings (written or oral) with respect
      to
      the subject matter hereof. The parties acknowledge and agree that the terms
      of
      the Confidentiality Agreement shall continue in full force and effect and apply
      in all respects to this Letter and any information provided in accordance with
      the terms hereof.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      oral
      agreements between the parties will be deemed to exist with respect to the
      Transaction. This Letter is solely for the benefit of the parties hereto and
      their respective successors and permitted assigns, and shall not be deemed
      to
      confer upon or give to any other third party any remedy, claim, liability,
      reimbursement, cause of action or other right.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Termination</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      This
      Letter shall terminate:</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">automatically,
      upon the first to occur of the following: (x) the close of business on November
      16, 2006 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>End
      Date</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>provided</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that,
      if Buyer shall have satisfied in all material respects its obligations under
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      3</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      above
      through the close of business on the End Date but the waiting period (and any
      extension thereof) applicable to the Transaction under the HSR Act shall not
      have been terminated or expired, Buyer and Seller agree that the End Date shall
      be extended to the close of business on January 16, 2007 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Extended
      End Date</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      to
      allow more time for such waiting period to have terminated or expired; and
      (y)
      the execution and delivery of Definitive Documentation, or;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font size="2"><sup>(5)</sup></font></td>
            <td align="left">
              <div align="justify"><font size="2"><sup><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
                distributions pursuant to the Operating Agreement of NEG Holding
                are
                solely to allow NEGI to pay interest on its 10.75% senior notes due
                2006
                (which are held by the Company), and are generally made at the end
                of each
                October and April, in the amount of approximately $8 million per
                distribution.</font></sup></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">by
      mutual
      written consent of each of the parties hereto; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">by
      Buyer
      upon written notice to Seller, if:(6)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
      breaches in any material respect: (x) its obligations under </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      during
      the Exclusivity Period; or (y) its obligations provided in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sections
      3, 6, 7 or 9</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (provided that if Seller shall cure such breach prior to the end of 3 full
      business days following the date of Seller&#8217;s receipt of written notice (which
      notice must be given on a business day), this Letter shall not be terminated
      and
      which cure period if invoked, shall extend the End Date referenced in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(a)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by such
      number of days); </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Company&#8217;s most recent Form S-1, NEG, Inc.&#8217;s most recent Form S-1 and Form S-4,
      or the most recent public filing by AREP to the extent regarding segment
      information of the Company, in each case made prior to the date hereof, taken
      as
      a whole, excluding the financial statements contained therein (which are
      addressed in clause (iii) below) (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>SEC
      Reports</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      (excluding the effect of any general disclaimers, risk factors or
      forward-looking statements, but after taking into account any disclosure in
      such
      provisions that are matters of fact), are materially untrue or incomplete or
      include a materially untrue statement of material fact or omit to state a
      material fact required to be stated therein or necessary in order to make the
      statements therein not materially misleading, in each case as of the date hereof
      (provided that the failure to update financial and accounting information to
      June 30, 2006 or to respond to SEC comments shall not in and of itself be
      conclusive of such SEC Reports being materially untrue or incomplete or be
      deemed to be a material omission); </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(A)
      the
      financial statements contained in the SEC Reports (provided that the failure
      to
      update financial and accounting information to June 30, 2006 or to respond
      to
      SEC comments shall not in and of itself be conclusive of such financial
      statements being materially untrue or incomplete or be deemed to be a material
      omission) or the NEG Oil &amp; Gas LLC June 30, 2006 financial statements (the
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>June
      30 Financials</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      that
      have been provided to Buyer, or (B) the December 31, 2005 reserve report that
      has been provided to Buyer, are materially untrue or incomplete or include
      a
      materially untrue statement of material fact or omit to state a material fact
      required to be stated therein or necessary in order to make the statements
      therein not materially misleading, in each case as of the date of the financial
      statements contained in such SEC Reports, such June 30 Financials or December
      31, 2005 reserve report; or there shall have been a Material Adverse Change
      with
      respect to the Company (as defined in the Term Sheet) between June 30, 2006
      and
      the date hereof;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as
      of any
      date no earlier than 5 days prior to the End Date (or, if applicable, 5 days
      prior to the Extended End Date), Buyer is ready and willing to effect the
      Closing and able to obtain the financing*</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      but, (A)
      Seller does not have board approval to enter into Definitive Documentation,
      (B)
      Seller, the Company or any material subsidiary of the Company is not duly
      formed, or (C) Seller does not possess unencumbered title to all of the equity
      interests of the Company (other than liens securing the Credit Facility and
      immaterial liens); </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as of
      any date no earlier than 5 days prior to the End Date (or, if applicable, 5
      days
      prior to the Extended End Date), Buyer is ready and willing to effect the
      Closing and able to obtain the financing</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><strong>**</strong></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      but,
      Seller and the Company are unable to complete the Restructuring(7) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">prior
      to
      or on such date (provided that, if such inability is the result of an injunction
      issued by a court of competent jurisdiction, Buyer will not be entitled to
      terminate the Letter under this clause (v) unless Buyer shall have agreed to
      extend and has extended the End Date to the Extended End Date to allow Seller
      to
      remove such injunction, in which event the End Date shall be extended to the
      Extended End Date); and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font size="2"><sup>(6)</sup></font></td>
            <td align="left">
              <div align="justify"><sup><font size="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                the extent that any items described in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sections
                11(c)(ii)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>11(c)(iii)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are based upon or include matters relating to Longfellow Ranch (in
                which
                Buyer owns a controlling interest) of which matters Buyer has knowledge
                as
                of the date hereof, such items shall not result in any breach of
                such
                Sections or otherwise give rise to any right of Buyer to terminate
                this
                Letter.</font></font></sup></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="line-height: 1.25;">
              <td align="left" style="width: 18pt;"><font size="2"><sup>(7)</sup></font></td>
              <td align="left">
                <div align="justify"><font size="2"><sup><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
                  used in clause (v) of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
                  11</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                  the phrase &#8220;Seller and the Company are unable to complete the
                  Restructuring&#8221; shall not include any obligation or ability on the part of
                  such parties to obtain any consents or amendments, or pay any amounts
                  outstanding, under the Credit Facility, as contemplated in footnote
                  3 of
                  this Letter, it being the sole obligation of Buyer to obtain or
                  pay the
                  same.</font></sup></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font size="2"><sup>**</sup></font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>As
                used in clauses (iv) and (v) of <u>Section 11</u>, the phrase &#8220;able to
                obtain the financing&#8221;, means that Buyer shall be in a position to receive,
                within 48 hours, the proceeds of the financing necessary to effect
                the
                Closing (including, if necessary as a result of required consents
                contemplated in footnote 3 not being obtained, the proceeds necessary
                to
                pay off the Credit Facility) by delivering a borrowing or drawdown
                or
                similar notice, or take similar action that may be applicable to
                a 144A
                equity or debt drawdown (and that Buyer has entered into binding
                definitive financing documentation for such financing) but shall
                not mean
                that Buyer shall have obtained or irrevocably bound itself to obtain
                the
                proceeds of such financing.</sup></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Company and its subsidiaries do not hold industry standard title to a material
      portion of their respective properties (other than liens securing the Credit
      Facility and immaterial liens) such that the SEC Reports or the June 30
      Financials are materially untrue or incomplete or include a materially untrue
      statement of material fact or omit to state a material fact required to be
      stated therein or necessary in order to make the statements therein not
      materially misleading.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">T</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">he
      parties agree that, in the event of termination of this Letter by Buyer as
      set
      forth in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(c)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      above,
      then Buyer shall be entitled to the return of the $10 million </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">paid
      to
      Seller as provided in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      1</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Buyer
      agrees that, except with respect to breaches of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (which
      shall be subject to the following paragraph), (i) it shall</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      not seek
      to recover any losses or damages under this Letter or for any breach of the
      terms of this Letter beyond the return of such $10 million, (ii) the return
      of
      such $10 million payment is Buyer&#8217;s sole and exclusive remedy under this Letter
      or for any breach of the terms of this Letter and (iii) Buyer shall in no event
      seek or be entitled to an injunction or specific performance of any kind.
      T</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">he
      Parents, Seller, the Company and their affiliates agree that the retention
      of
      the $10 million paid to Seller pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      1</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      their sole and exclusive remedy under this Letter </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
      for
      any breach of the terms of this</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      and that they shall</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      not seek
      to recover any losses or damages, and shall in no event, seek or be entitled
      to
      an injunction or specific performance of any kind. The Parents and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
      agree to return to Buyer the $10 million amount provided in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      1</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      in
      immediately available funds to an account designated by Buyer, immediately
      if
      this Letter terminates pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(c)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      If
      Definitive Documentation has been executed and delivered, such Definitive
      Documentation shall contain substantially similar termination provisions as
      in
      this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in
      addition to customary termination rights for Seller and Buyer. Notwithstanding
      anything in this agreement to the contrary, if Buyer provides Seller with a
      good
      faith written notice of termination pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(c)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior to
      the automatic termination of this Letter pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(a)(x)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      then
      Buyer&#8217;s right to make a claim for the return of the $10 million paid to Seller
      shall survive until final resolution of such claim (notwithstanding an
      intervening automatic termination pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(a)(x)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
      agrees that neither (a) the declaration of a &#8220;Default&#8221; or an &#8220;Event of Default&#8221;
by the agent or the lenders under the Credit Facility as a result of the
      consummation of the Transaction or the Restructuring or the unwinding of hedges
      or the distribution of the Stock and the Note pursuant to the Restructuring
      or
      the distribution of cash pursuant to adjustments set forth in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      4</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or any
      similar provisions of the Definitive Documentation nor (b) the failure of the
      lenders under the Credit Facility to consent to any assignment, waiver,
      amendment, modification, forbearance or change under the Credit Facility
      necessary for the consummation of the Transaction, shall in any event give
      rise
      to a right of Buyer to receive a refund or return of the $10 million paid to
      Seller. Notwithstanding the foregoing, none of the foregoing limitations shall
      apply with respect to any breaches of the Confidentiality Agreement, which
      shall
      continue on its own terms as a fully enforceable agreement separate and apart
      from this Letter. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">T</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">he
      parties agree that, in the event of termination of this Letter by Buyer as
      set
      forth in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(c)(i)(x)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      above
      (i.e., </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">breach
      of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">),
      then:
      (i) Buyer shall be entitled to the return of the $10 million </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">paid
      to
      Seller as provided in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      1</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      (ii) if
      the Parents, Seller, the Company or any of their affiliates shall, within three
      (3) months following such termination of this Letter, enter into a written
      agreement with a third party (as to which any of the parties bound by
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      herein
      violated their obligations under </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      5</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      with
      respect to a Competing Proposal, Buyer shall be entitled to an additional
      payment of $10 million from the Parents; (iii) Buyer shall</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      not seek
      to recover any losses or damages beyond such amounts; (iv) the payment of such
      amounts is Buyer&#8217;s sole and exclusive remedy under this Letter or for any breach
      of the terms of this Letter; and (v) Buyer shall in no event seek or be entitled
      to an injunction or specific performance of any kind. The Parents and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
      agree to make such payments to Buyer, in immediately available funds to an
      account designated by Buyer, immediately if this Letter terminates pursuant
      to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      11(c)(i)(x)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Assignment</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Neither
      this Letter nor any rights or obligations hereunder may be assigned by any
      party
      hereto without the prior written consent of the other party.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Counterparts</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      This
      Letter may be signed in one or more counterparts, each of which may be an
      original or facsimile and all of which taken together shall constitute one
      and
      the same instrument.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Notices</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      All
      notices and other communications hereunder shall be in writing and delivered
      (i)
      personally, (ii) by overnight courier or (iii) facsimile (with a PDF or other
      copy by electronic mail), and shall be deemed duly given on the date of
      delivery. All notices hereunder shall be delivered as set forth below, or
      pursuant to such other instructions as may be designated in writing by the
      party
      to receive such notice.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
      to
      Buyer, to</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Riata
      Energy, Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1601
      Northwest Expressway, Suite 1600<br></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oklahoma
      City, OK 73118<br></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      General Counsel<br></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile
      No.: (405) 753- 5975<br></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Email:
      mmccann@riataenergy.net</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">with
      a
      copy to</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Simpson
      Thacher &amp; Bartlett LLP</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">425
      Lexington Avenue</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
      York,
      New York 10017</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      Robert E. Spatt, Esq. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Edward
      J.
      Chung, Esq.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile
      No.: (212) 455-2502</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Email:
      rspatt@stblaw.com</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Email:
      echung@stblaw.com</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
      to
      AREP, AREH or Seller, to</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">White
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Plains</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Plaza</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">445
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Hamilton</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Avenue -
      Suite 1210</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">White
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Plains</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      NY
      10601</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      Felicia Buebel, Esq.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile
      No.: (914) 614-7001</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Email:
      fpb@areh.net</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">with
      a
      copy to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DLA
      Piper
      Rudnick Gray Cary</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1251
      Avenue of the Americas</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
      York,
      New York 10020</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      Steven L. Wasserman, Esq.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Facsimile
      No.: (212) 835-6001</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Email:
      steven.wasserman@dlapiper.com</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Governing
      Law; Venue</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Letter shall be governed by and construed in accordance with the laws of the
      State of New York. Each party to this Letter agrees that it will bring any
      action or proceeding in respect of any claim arising out of or related to this
      Letter or the Transaction, whether in tort or contract or at law or in equity,
      exclusively in the federal or state courts located in New York, New York (the
      &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Chosen
      Courts</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).
      In
      addition, each party hereby (a) irrevocably submits to the exclusive
      jurisdiction of the Chosen Courts, (b) waives, to the fullest extent permitted
      by applicable law, any objection to laying venue in the Chosen Court and agrees
      that it will not attempt to deny or defeat such personal jurisdiction by motion
      or other request for leave from any such court, and (c) waives any objection
      or
      defense that the Chosen Court is an inconvenient forum or does not have personal
      jurisdiction over any party to this Letter. Each party hereto further agrees,
      to
      the fullest extent permitted by applicable law, that any final judgment in
      any
      such action or proceeding shall be conclusive and may be enforced in any other
      jurisdiction within or outside the United States by suit on the judgment.
      Further, each party hereto hereby waives all right to trial by jury in any
      claim, action, proceeding or counterclaim by either party against the other
      on
      any matters arising out of or in any way connected with this
      Letter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[Signature
      page follows]</font></div>
    <div><br>
      <div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="2">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
          </div>
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      foregoing terms and conditions correctly sets forth your understanding with
      respect to the Option and the Transaction, please indicate by executing a copy
      of this Letter as provided below and returning the same to the
      undersigned.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RIATA
      ENERGY, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 243pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>____________/s/
      Tom L. Ward__</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 243pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Tom
      L. Ward</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 243pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title:
      Chief Executive Officer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ACCEPTED
      AND AGREED:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      American Property Investors, Inc.,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">its
      general partner</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>______/s/
      Keith A. Meister__________</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Keith A. Meister</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Title:
      Principal Executive Officer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AMERICAN
      REAL ESTATE HOLDINGS </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LIMITED
      PARTNERSHIP</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      American Property Investors, Inc.,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">its
      general partner</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>________/s/
      Keith A. Meister _____</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Keith A. Meister</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Title:
      Principal Executive Officer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[Exclusivity
        Agreement and Letter of Intent Signature Page]</font></div><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ANNEX
      A</font></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>THIS
        TERM SHEET IS A PRELIMINARY SUMMARY OF NON-BINDING TERMS CONCERNING A POSSIBLE
        TRANSACTION BETWEEN THE PARTIES. THIS TERM SHEET IS FOR DISCUSSION PURPOSES
        ONLY
        IN ORDER TO FACILITATE DISCUSSIONS BETWEEN THE PARTIES REGARDING A POTENTIAL
        TRANSACTION AND DOES NOT CONSTITUTE AND WILL NOT GIVE RISE TO ANY LEGALLY
        BINDING AGREEMENT, OBLIGATION OR DUTY OF ANY KIND OR CHARACTER (INCLUDING,
        WITHOUT LIMITATION, ANY AGREEMENT, OBLIGATION OR DUTY TO ACT REASONABLY,
        FAIRLY
        OR IN GOOD FAITH) ON THE PART OF EITHER PARTY OR THEIR RESPECTIVE AFFILIATES,
        OFFICERS, DIRECTORS, STOCKHOLDERS, EMPLOYEES OR
        AGENTS.</strong></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Term
      Sheet</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Defined
                Terms:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capitalized
                terms used but not defined in this Term Sheet have the meanings given
                in
                the Letter to which this Term Sheet is attached.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Buyer:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Riata
                Energy, Inc. or a subsidiary thereof.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Seller:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AREP
                O &amp; G Holdings LLC, the sole owner of membership interests in NEG Oil
                &amp; Gas, LLC, after giving effect to the Restructuring (as defined
                below). </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                purposes of this Term Sheet and the avoidance of doubt, the Company
                shall
                not be deemed to include the corporate entity, National Energy Group,
                Inc.
                but will be deemed to include all of the issued and outstanding membership
                interests of NEG Holding LLC held by NEGI to be acquired by the Company
                in
                the Restructuring, and NEGI shall not be deemed to be a direct or
                indirect
                subsidiary of the Company, the Seller or the
                Parents.(8)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
                Parents: </em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
                Real Estate Partners L.P.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
                Real Estate Holdings Limited Partnership</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AREP
                Oil &amp; Gas Holdings, LLC</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Transaction;
                Restructuring:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                Buyer elects to exercise the Option, on the Closing Date, Buyer will
                purchase from Seller, and Seller will sell to Buyer, all of the issued
                and
                outstanding membership interests of the Company. </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
                to the Closing, Seller will, or will cause the Company to (or will
                cause
                NEG Holding to), at Seller&#8217;s expense, exercise its redemption/call right
                provided in Section 5.4 of the Operating Agreement For NEG Holding
                LLC,
                dated May 1, 2001 (or achieve the same result through another mechanism),
                and distribute (i) the Company&#8217;s 50.1% common stock interest of NEGI (the
                &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
                to Seller or its other affiliates and (ii) the $148.6 million NEGI
                10.75%
                senior notes due 2006 (extended maturity to 10/31/2007) held by the
                Company (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Note</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
                in a transaction to close upon and simultaneously with the Closing,
                such
                that the Company will own 100% of NEG Holding (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restructuring</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);
                Parents will indemnify Buyer for all liabilities related to NEGI,
                any
                claims of or liabilities to the shareholders of NEGI, or any obligations
                or liabilities related to the exercise of the redemption/call
                right;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                will either obtain any required consents or amendments, or pay all
                amounts
                outstanding, under the Credit Facility at Closing, as contemplated
                in
                footnote 3 of the Letter.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
                between Buyer and Seller, Parents and Seller shall retain all liabilities
                and obligations related to the Restructuring and the cash-out of
                the
                public shareholders of NEGI, if any, and shall bear all liabilities,
                costs
                and expenses associated with or resulting from the Restructuring,
                or any
                claims made by the public shareholders of NEGI regarding NEGI, the
                Restructuring, or any subsequent liquidation or similar action with
                respect to NEGI (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restructuring
                Liabilities</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font size="2"><sup>(8)</sup></font></td>
            <td align="left">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>As
                of July 31, 2006, NEGI&#8217;s assets, other than its membership interest in NEG
                Holding, consisted of: (i) cash and cash equivalents in the amount
                of
                approximately $3.06 million; (ii) accounts receivable from the Company
                and
                its subsidiaries under operating and management contracts (all of
                which
                will be terminated as of the closing of the Transaction) in the amount
                of
                approximately $1.4 million; (iii) a deferred tax asset in the amount
                of
                approximately $6.2 million; and (iv) other assets unrelated to oil
                and gas
                operations (including, furniture, computers, leases for office space
                and
                office equipment and similar items, but not including any information
                technology, software and data relevant to the oil and gas operations
                of
                the Company or its subsidiaries, including NEG Holding, whether or
                not on
                such computers, which will be transferred to Buyer as part of the
                Transaction). All references herein to the SEC Reports (as defined
                in
                </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>Section
                11(c)(ii)</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>
                of the Letter) and financial statements shall be deemed to exclude
                such
                assets of NEGI (other than NEGI&#8217;s membership interests in NEG Holding and
                such information technology, software and
                data).</sup></font>&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">A-1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Purchase
                Price:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Aggregate
                purchase price of $1.519 billion (described in further detail below),
                subject to the mandatory cash adjustment and working capital adjustment
                described in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
                4</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the Letter.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Cash:</em></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1.025
                billion in immediately available funds currently contemplated to
                come
                from:</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                $10 million that has been provided in connection with the execution
                of the
                Letter shall be applied towards the aggregate purchase price and
                shall
                reduce the below amounts accordingly</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$400
                million will be provided from new 3</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>rd</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                party common stock issuance</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$625
                million will be provided by a bridge loan to be replaced by a high
                yield
                debt offering (but some of which could be common stock
                instead)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Buyer
                Common Stock:</em></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,842,000
                shares of Buyer common stock.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tom
                Ward and Malone Mitchell (in each case, together with his wife and
                children, entities, trusts and other affiliates, whether or not controlled
                (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Affiliated
                Parties</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
                holding common stock, preferred stock, options, warrants, or any
                other
                equity or debt securities or instruments convertible into common
                stock, of
                Buyer (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                Equity Securities</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;))
                and Buyer will undertake, that if Tom Ward or Malone Mitchell or
                any
                Affiliated Parties acquire any Buyer Equity Securities from Buyer
                from
                September 1, 2006 until the expiration of the post-Qualified Public
                Offering lock-up period applicable to Seller and its affiliates at
                less
                than fair market value (it being agreed that Tom Ward, Malone Mitchell
                and
                the Affiliated Parties shall only acquire Buyer Equity Securities
                for cash
                or tangible assets), other than as part of their participation in
                management or employee compensation arrangements not to exceed, with
                respect to all employees of Buyer, in the aggregate 2% of outstanding
                Buyer common stock per calendar year, then Seller shall be provided
                an
                opportunity, to close at the same time as any such transaction involving
                Tom Ward, Malone Mitchell or the Affiliated Parties, to acquire from
                Buyer
                a proportionate number of additional Buyer Equity Securities at the
                same
                price and on the same terms as Tom Ward or Malone Mitchell or such
                Affiliated Parties, as the case may be.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
                of the Parents, Seller or any of their respective affiliates shall
                be
                restricted from purchasing additional Buyer Equity Securities and
                the
                Definitive Documentation will contain no &#8220;stand-still&#8221; provisions on such
                purchases.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Cash
                and Debt at Closing:</em></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                Company and its subsidiaries will have $50 million of cash (or, if
                the
                cash amount is more or less than $50 million, adjustments to the
                cash
                consideration will be made pursuant to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
                4</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the Letter) and no more than $300 million of third party debt obligations
                (consisting of borrowings under the Credit Facility) at
                Closing.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Transaction
                Expenses:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
                8</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the Letter.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Tax
                Treatment:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                purchase of all of the Company's membership interests is substantially
                an
                asset purchase from the Buyer's perspective (and the Company has
                not and
                will not elect to be treated as a corporation). </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                the extent possible, Seller will make, and will cause the Company
                and its
                subsidiaries to make, all Section 754 elections as Buyer may
                request.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                distributions of the Stock and the Note shall not be taxable to the
                Company and its subsidiaries.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
                upstream notes, obligations or liabilities of the Company or its
                subsidiaries for the benefit of the Parents, Seller or their respective
                affiliates will be eliminated without the incurrence of tax obligations
                or
                liabilities to the Company or its subsidiaries.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                the extent any such matters that are intended to be tax neutral to
                the
                Company and its subsidiaries are not, the Parents shall indemnify
                Buyer
                against all such taxes.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">A-2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Employee
                Matters: </em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                shall have the option, but not the obligation, to offer employment
                to any
                or all of the former NEGI employees. Buyer is not responsible for
                any
                obligations to the former NEGI employees, and Seller or NEGI will
                retain
                all liabilities and obligations to such employees (including
                severance).</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Ordinary
                Course Operation:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
                to Closing, the Company shall be operated in the ordinary course
                of
                business consistent with past practice and will not, among other
                things,
                take any actions enumerated in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
                9</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the Letter. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>IPO
                of Buyer:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                shall use its reasonable best efforts to complete an initial public
                offering within one year after the Closing (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Target
                Date</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
                which shall be an underwritten, broad based offering of in excess
                of $100
                million in common shares and result in not less than 20 million shares
                (including the 144A equity holders) being listed for trading on a
                national
                securities exchange (a &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Qualified
                Public Offering</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Registration
                Rights:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
                will have customary piggyback registration rights and, following
                a
                Qualified Public Offering, 3 demand registration rights (including
                shelf
                registration, if available) with customary terms, restrictions and
                blackout periods. Shares of Buyer common stock held by Seller and
                its
                affiliates will be subject to a lock up (including as to PORTAL and
                144A
                trading) from the date of issuance until 180 days after a Qualified
                Public
                Offering of Buyer&#184; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provided</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                that (i) Tom Ward and Malone Mitchell and the Affiliated Parties
                agree to
                an equivalent lock up for the same period and (ii) Seller shall be
                released (a) if and to the same extent as the lock-up with respect
                to Tom
                Ward or Malone Mitchell or the Affiliated Parties is released and
                (b)
                solely with respect to PORTAL and 144A trading, upon the Target Date.
                For
                the avoidance of doubt, (A) if Seller exercises its demand registration
                right (subject to the terms herein) such registration rights will
                have
                priority to, and will not be cut back as a result of, piggyback
                registration rights held by Tom Ward or Malone Mitchell or the Affiliated
                Parties, (B) if Tom Ward or Malone Mitchell or the Affiliated Parties
                exercise a demand registration right, such registration rights will
                have
                priority to, and will not be cut back as a result of, piggyback
                registration rights held by Seller or its affiliates, and (C) if
                any third
                party exercises a demand registration right or Buyer otherwise files
                a
                registration statement or effects an initial public offering, each
                of Tom
                Ward, Malone Mitchell and the Affiliated Parties, on the one hand,
                and
                Seller and its affiliates, on the other, shall have pari passu piggyback
                registration rights with respect to each other regarding such registration
                or initial public offering.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                Buyer has not completed a Qualified Public Offering prior to the
                Target
                Date, Seller will have the right to cause the Company to go public
                by
                exercising its demand registration right, but such right shall be
                subject
                to customary terms, restrictions and blackout periods (provided that
                Seller may not impose any black-out period for more than 60 days
                in any 90
                day period or 90 days in any 360 day period). Tom Ward and Malone
                Mitchell
                and the Affiliated Parties shall not have a parallel pre-Qualified
                Public
                Offering demand registration right (as described in the preceding
                sentence).</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
                shall have the ability to transfer rights under its registration
                rights
                agreement (other than the rights described in the immediately preceding
                paragraph) to up to two transferees in connection with substantial
                (amount
                to be determined in Definitive Documentation) sales of its shares
                so long
                as the overall rights under the registration rights agreement (e.g.,
                number of demands, etc.) are not expanded and Seller and such transferees
                exercise such registration rights together as a group acting by majority
                vote of the shares held by them.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">A-3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%">&#160;</td>
            <td align="justify" valign="top" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller&#8217;s
                registration rights will be subject to existing priority and timing
                of
                registration rights of existing 144A holders as provided in the Resale
                Registration Rights Agreement between Buyer and Banc of America Securities
                LLC, dated December 21, 2005 and attached as Exhibit 4.2 to the Buyer
                S-1,
                filed on February 10, 2006 with the SEC, which agreement may not
                be
                amended in any manner detrimental in any material respect to Seller&#8217;s
                registration rights described in this Term Sheet. Seller shall have
                pari
                passu rights with any future registration rights granted by Buyer
                (including in connection with the contemplated acquisition financing)
                for
                such periods and on such terms as are agreed by the parties. </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tag
                Along Rights: Seller shall have tag along rights with respect to
                the
                shares purchased or received hereunder on negotiated and block sales
                of
                substantial blocks of Buyer common stock by Tom Ward and Malone Mitchell
                and the Affiliated Parties, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provided</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                that such rights shall expire on the earlier of (i) 2 years after
                a
                Qualified Public Offering or (ii) such time when the remaining shares
                purchased or acquired hereunder, beneficially owned by the Parents,
                Seller
                and their affiliates taken together, represent in the aggregate less
                than
                5% of Buyer (but in no event shall such parties be deemed to beneficially
                own less than 5% of Buyer as a result of the contemplated acquisition
                financing). Prior to the Qualified Public Offering, without Seller&#8217;s
                consent, neither Tom Ward nor Malone Mitchell nor the Affiliated
                Parties
                shall sell Buyer Equity Securities unless Seller has previously sold
                all
                of its shares of Buyer common stock acquired pursuant to the Transaction
                or Seller is provided an opportunity to sell all of such shares in
                such
                sale on the same terms and conditions as Tom Ward or Malone Mitchell
                or
                the Affiliated Parties, as the case may be.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                will bear the registration expenses (exclusive of underwriting discounts
                and commissions) of all piggyback and demand registrations, including
                the
                reasonable fees and expenses of one counsel for the selling holders
                of its
                securities. The definitive registration rights documentation will
                contain
                such other provisions with respect to registration rights as are
                customary, including cross-indemnification and underwriting
                arrangements.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Material
                Adverse Change</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Material
                Adverse Change</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                shall mean, when used in connection with Buyer or Seller, as the
                case may
                be, any change, event, occurrence, condition, circumstance, development
                or
                effect that, individually or in the aggregate has had, or will have,
                a
                material adverse effect on the business, properties, assets, liabilities,
                condition (financial or otherwise) or results of operations of such
                entity
                and its subsidiaries taken as a whole, or that would reasonably be
                expected to materially delay or adversely affect the ability of such
                entity to consummate the Transaction; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provided</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                however, that any change, event, occurrence, condition, circumstance,
                development or effect that is (i) primarily caused by conditions
                affecting
                the United States economy generally or the economy of any nation
                or region
                in which such entity or any of its subsidiaries conducts business
                that is
                material to the business of such entity and its subsidiaries, taken
                as a
                whole, shall not be taken into account in determining whether there
                as
                been or would be "Material Adverse Change" on or with respect to
                such
                entity, (ii) primarily caused by conditions generally affecting the
                oil
                and gas industry shall not be taken into account in determining whether
                there has been or would be a "Material Adverse Change" on or with
                respect
                to such entity, and (iii) primarily caused by the announcement or
                pendency
                of the Letter, the Definitive Documentation or the transactions
                contemplated hereby shall not be taken into account in determining
                whether
                there has been or would be a "Material Adverse Change" on or with
                respect
                to such entity, except in the case of clauses (i) and (ii), to the
                extent
                such change, event, occurrence, condition, circumstance, development
                or
                effect has a disproportionate adverse effect on such party and its
                subsidiaries as compared to any other person engaged in the same
                business.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">A-4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Seller
                Representations and Warranties; Survival:</em></font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 153pt; LINE-HEIGHT: 1.25"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt"></font>&#160;</div>
            </td>
            <td align="left" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
                of the representations and warranties in the definitive purchase
                agreement
                shall survive the Closing except:</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">certain
                fundamental representations regarding authority, due formation, and
                capital structure of the Company and title to equity interests being
                sold
                shall survive indefinitely; </font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">representations
                and warranties with respect to accuracy in all material respects
                of the
                SEC Reports (excluding the effect of any general disclaimers, risk
                factors
                or forward-looking statements, but after taking into account any
                disclosure in such provisions that are matters of fact) (subject
                to the
                same provisos in the Letter), accuracy in all material respects of
                updated
                financial statements, accuracy in all material respects of the updated
                reserve report, industry standard title to properties, absence of
                Restructuring Liabilities, termination of affiliate transactions
                (including guarantees and obligations to Seller affiliates or to
                third
                parties on behalf of Seller affiliates), and absence of Material
                Adverse
                Change of the business since the date of the updated financials shall
                survive for 15 months after the Closing;</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">representations
                and warranties with respect to material environmental liabilities
                (which
                shall be knowledge based) shall survive 2 years after the Closing;
                and</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">representations
                and warranties with respect to tax liabilities shall survive the
                Closing
                for a period ending 15 days past the applicable statute of
                limitations.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                representations and warranties in clauses (ii), (iii) and (iv) are
                referred to as the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
                Business Representations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Buyer
                Representations and Warranties; Survival:</em></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
                of the representations and warranties in the definitive purchase
                agreement
                shall survive the Closing except:</font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">certain
                fundamental representations regarding authority, due formation, and
                capital structure of Buyer shall survive indefinitely; </font></div>
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">representations
                and warranties with respect to accuracy in all material respects
                of the
                144A offering memorandum prepared in connection with the raising
                of the
                third party common stock issuance for the Transaction described under
                &#8220;Purchase Price - Cash&#8221; above (currently contemplated to be approximately
                $400 million) (excluding the effect of any general disclaimers, risk
                factors or forward-looking statements, but after taking into account
                any
                disclosure in such provisions that are matters of fact) (subject
                to the
                same provisos in the Letter), accuracy in all material respects of
                financial statements contained in such 144A offering memorandum,
                and
                absence of Material Adverse Change of the business since the date
                of such
                financials contained in the 144A offering memorandum shall survive
                15
                months after the Closing (such representations and warranties in
                this
                clause (ii), the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                Business Representations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Indemnification:</em></strong></font></div>
            </td>
            <td align="left" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Definitive
                Documentation will include post-closing indemnification of Buyer
                by the
                Parents for (a) Restructuring Liabilities and any other liabilities
                related to NEGI (including employee severance and other costs), (b)
                all
                pre-Closing tax liabilities, (c) liabilities of Seller or the Parents
                incurred by Buyer based on the Company&#8217;s former status as a subsidiary or
                member of the consolidated entity with the Parents, (d) liabilities
                related to affiliate transactions and guarantees (e) breaches of
                any
                covenants, and (f) breaches of representations and warranties stated
                to
                survive the Closing.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$5
                million basket and 25% cap reciprocal with respect to indemnities
                for the
                Seller Business Representations and Buyer Business
                Representations.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Affiliate
                Transactions: </em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                Parents, Seller and the Company shall terminate all obligations and
                liabilities of the Company or its subsidiaries to, or on behalf of,
                the
                Parents, Seller or their respective affiliates, and there shall not
                exist
                any such remaining liability of the Company or any of its subsidiaries
                after the Closing to the Parents, Seller or their other respective
                affiliates. </font></div>
            </td>
          </tr>

      </table>
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    <div>&#160;</div>
    <div>&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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    <div>&#160;</div>
    <div>
      <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Closing
                Conditions:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                Definitive Documentation will contain customary closing conditions
                for oil
                and gas transactions. Without limiting the foregoing, the closing
                conditions shall include: (a) no material adverse change to Buyer
                or
                Seller since the date of their respective updated financials, (b)
                receipt
                of all required approvals from governmental authorities including
                HSR
                approval,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)
                receipt of any material third party consents or approvals, (d) completion
                of the Restructuring substantially in accordance with this Term Sheet,
                (e)
                no injunction, (f) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">termination
                of all affiliate transactions, guarantees (including obligations
                to third
                parties on behalf of the Parents, Seller or their respective affiliates)
                (other than between the Company and the Company&#8217;s subsidiaries),
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                (g) Buyer&#8217;s receipt of financing</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                the extent that the parties enter into Definitive Documentation that
                contemplates a closing after the End Date (or the Extended End Date,
                as
                the case may be), such entering into will be by choice of the parties
                and
                the Definitive Documentation under such circumstances will likely
                contain
                a drop dead date to be negotiated.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>No
                Third Party Beneficiaries:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                Term Sheet and the Letter to which it is attached is solely for the
                benefit of Buyer and Seller and their respective successors and permitted
                assigns and shall not be deemed to confer upon or give to any other
                third
                party any remedy, claim, liability, reimbursement, cause of action
                or
                other right.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Public
                Announcements:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
                as may be required by law or legal process and disclosures necessary
                in
                connection with financing transactions by Buyer or any of its related
                entities, neither Buyer nor Seller, nor any of their respective
                affiliates, will issue any press release or make any public statement
                regarding the Transaction before consummation of the Transaction.
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Buyer
                acknowledges that (i) Seller will promptly file this Term Sheet and
                the
                accompanying Letter as an exhibit to an amendment to its Schedule
                13D and
                (ii) AREP will file a Form 8-K with respect to entering into a material
                agreement. Seller acknowledges that Buyer will conduct an investor
                conference call with its 144A holders. Buyer and Seller will promptly
                issue a joint press release. Each of the parties agrees to consult
                with
                the other regarding these respective disclosures.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="35%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Governance
                Rights:</em></strong></font></div>
            </td>
            <td align="justify" valign="top" width="65%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seller
                will not receive any governance rights, boards seats, or other similar
                provisions. </font></div>
            </td>
          </tr>

      </table>
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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>v052296_ex99-1.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff">
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RIATA
      ENERGY, INC. AND AMERICAN REAL ESTATE PARTNERS, L.P.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ANNOUNCE
      LETTER OF INTENT </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Oklahoma
      City, Oklahoma / New York, New York / September 7, 2006</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      - Riata
      Energy, Inc. (&#8220;Riata&#8221;) and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
      Real Estate Partners, L.P. (NYSE: ACP)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(&#8220;AREP&#8221;)
      today </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">announced
      that they have entered into an exclusivity agreement and letter of intent
      pursuant to which Riata would obtain an option to acquire NEG Oil &amp; Gas LLC
      (&#8220;NEG Oil &amp; Gas&#8221;), a wholly-owned subsidiary of AREP which holds all of
      AREP&#8217;s oil and gas investments. The option and exclusivity period would expire
      in 70 days, subject to extension in certain circumstances. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      letter of intent provides that the aggregate consideration for the acquisition
      would be $1.519 billion, subject to certain adjustments. As part of the
      consideration, Riata would issue 12.8 million shares of its common stock at
      $19
      per share. The balance of the consideration, $1.025 billion, would be payable
      in
      cash, of which $10 million has today been paid to AREP. Riata would also assume
      up to $300 million of debt of NEG Oil &amp; Gas and receive $50 million in cash.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      transaction would include the acquisition of all of the issued and outstanding
      membership interests of NEG Holding LLC held by National Energy Group, Inc.
      (OTC
      Bulletin Board: NEGI), which are to be acquired by NEG Oil &amp; Gas in a
      restructuring transaction to occur contemporaneously with the closing of the
      transactions contemplated by the letter of intent. The transaction would not
      include the acquisition of any equity ownership of National Energy Group, Inc.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      letter of intent provides for a 70-day exclusivity period, during which AREP
      and
      certain of its affiliates have agreed not to solicit, negotiate or accept
      competing proposals.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tom
      L.
      Ward, Riata&#8217;s Chairman and CEO, said, &#8220;This transaction continues to focus Riata
      on our largest asset, the West Texas Overthrust Belt. With the consummation
      of
      the NEG acquisition, as well as six other property acquisitions since May 1,
      we
      would have over 83% Working Interest in the Pinon Field and over 260,000 net
      acres of land in the West Texas Overthrust Belt. Our pro forma production as
      a
      result of this acquisition would increase by over four times. We would also
      plan
      to implement a 20 rig drilling program in Pinon Field by year end 2007. We
      would
      also expand our core area of operations to include East Texas, the Gulf Coast
      and the Gulf of Mexico. NEG would bring a great staff and we look forward to
      welcoming them to Oklahoma City. In fact, many would be returning home as NEG
      was the successor company to Alexander Energy Corporation, which was based
      in
      Oklahoma City until 1996.&#8221; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Carl
      C.
      Icahn, AREP&#8217;s Chairman, said, &#8220;AREP&#8217;s investment in NEG Oil &amp; Gas has proven
      to be tremendously successful. I commend Bob Alexander and his team for their
      efforts in building a great company. We believe that by combining these assets
      with Riata they will be positioned to grow to the next level.&#8221; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      transaction is subject to the negotiation and execution of definitive
      documentation, completion of due diligence investigations, the making of
      necessary filings and completion of waiting periods under the Hart-Scott-Rodino
      Antitrust Improvements Act and satisfaction of certain other conditions,
      including the receipt of new financing. The parties anticipate that the
      transaction will be completed over the next two months. There can be no
      assurance, however, that definitive documentation will be agreed to, that Riata
      will exercise the option, that financing will be obtained or other closing
      conditions will be satisfied or that the transaction will be
      completed.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      copy of
      the exclusivity agreement and letter of intent is being filed with the U.S.
      Securities and Exchange Commission by AREP on a Current Report on Form 8-K.
      Anyone who wishes to obtain a copy of the letter of intent may do so from the
      Internet website maintained by the SEC at http://www.sec.gov. In addition,
      a
      copy of the exclusivity agreement and letter of intent will be made available,
      along with this press release, at Riata&#8217;s Internet website at
      http://www.riataenergy.net. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Riata
      is
      an oil and natural gas company with its principal focus on exploration and
      production. Riata also owns and operates drilling rigs and a related oil field
      services business operating under the Lariat Services Inc. brand name; gas
      gathering, marketing and processing facilities; and, through its subsidiary
      PetroSource Energy Company, CO</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sub>2</sub></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      treating
      and transportation facilities and tertiary oil recovery operations. Riata has
      focused its exploration and production activities in West Texas where it has
      assembled a large, focused acreage position.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AREP,
      a
      master limited partnership, is a diversified holding company engaged in a
      variety of businesses. AREP&#8217;s businesses currently include gaming; oil and gas
      exploration and production; real estate and home fashion. To learn more about
      AREP, please visit www.areplp.com. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NEG
      Oil
&amp; Gas is an independent oil and gas exploration, development and production
      company based in Dallas, Texas. The core areas of operations of NEG Oil &amp;
Gas are the Val Verde and Permian Basins of West Texas, the Cotton Valley Trend
      in East Texas, the Gulf Coast and the Gulf of Mexico. NEG Oil &amp; Gas also
      owns oil and gas properties in the Anadarko and Arkoma Basins of Oklahoma and
      Arkansas.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      release contains certain &#8220;forward-looking statements&#8221; within the meaning of the
      Private Securities Litigation Reform Act of 1995, many of which are beyond
      Riata&#8217;s and AREP&#8217;s ability to control or predict. Forward-looking statements may
      be identified by words such as &#8220;expects,&#8221; &#8220;anticipates,&#8221; &#8220;intends,&#8221; &#8220;plans,&#8221;
&#8220;believes,&#8221; &#8220;seeks,&#8221; &#8220;estimates,&#8221; &#8220;will&#8221; or words of similar meaning and
      include, but are not limited to, statements about the expected future business
      and financial performance of Riata and AREP and their respective subsidiaries.
      Riata and AREP undertake no obligation to publicly update or review any
      forward-looking information, whether as a result of new information, future
      developments or otherwise.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      further information, please contact: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
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          <tr bgcolor="white">
            <td width="37%">
              <div><font size="2">Dirk M. Van Doren</font></div>
              <div><font size="2">Chief Financial Officer<br>Riata Energy,
                Inc.</font></div>
              <div><font size="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(405)
                753-5520&#160;</font></font><font size="3"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></font></div>
            </td>
            <td valign="top" width="37%">
              <div><font size="2">Hillel Moerman</font></div>
              <div><font size="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer</font></font></div>
              <div><font size="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">American
                Real Estate Partners, L.P.</font></font></div>
              <div><font size="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">212)
                702-4300</font></font></font></div>
            </td>
            <td width="26%">&#160;</td>
          </tr>

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