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<SEC-DOCUMENT>0001144204-06-044333.txt : 20061031
<SEC-HEADER>0001144204-06-044333.hdr.sgml : 20061031
<ACCEPTANCE-DATETIME>20061030173534
ACCESSION NUMBER:		0001144204-06-044333
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20061025
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20061031
DATE AS OF CHANGE:		20061030

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:		061173261

	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>v055799.htm
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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: 12pt; FONT-FAMILY: Times New Roman"><strong>FORM
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            <td align="left" valign="middle" width="28%">
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          <tr>
            <td valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td align="left" valign="middle" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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            <td align="left" valign="middle" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td valign="middle" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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            <td valign="top" width="28%" style="border-bottom: #ffffff solid;">
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            <td align="left" valign="middle" width="2%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td valign="top" width="40%" style="border-bottom: black thin solid;">
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            <td align="left" valign="middle" width="2%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td valign="middle" width="28%" style="border-bottom: #ffffff solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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          <tr>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td colspan="3" valign="middle" width="44%">
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                name or former address, if changed since last report)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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            <td align="left" valign="middle" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      the
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      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="left"><br></div>
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            <td align="left" valign="top" width="6%">
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                communication pursuant to Rule 425 under the Securities Act (17 CFR
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    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="6%">
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                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      1 - Registrant&#8217;s Business and Operations</strong></font></div>
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      1.01 - 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>
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      October 25, 2006, National Energy Group, Inc. (OTCBB:NEGI), or NEGI, our
      majority owned subsidiary, and our subsidiaries NEG Oil &amp; Gas LLC, NEG, Inc.
      and American Real Estate Holdings Limited Partnership, or AREH, entered into
      an
      agreement pertaining to the possible purchase of NEGI&#8217;s membership interest in
      NEG Holding LLC (&#8220;NEG Holding&#8221;). NEG Oil &amp; Gas, which is our wholly-owned
      indirect subsidiary, is the owner of 50.01% of NEGI&#8217;s common stock and the
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      possible purchase of NEGI&#8217;s membership interest in NEG Holding would be pursuant
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      Operating Agreement, which provides that NEG Oil &amp; Gas has the right at any
      time to purchase, or to cause NEG Holding to purchase, NEGI&#8217;s interest in NEG
      Holding for an amount equal to the fair market value of NEGI&#8217;s interest
      determined as if NEG Holding had sold all of its assets for fair market value
      and liquidated. </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">Pursuant
      to the agreement, if the transactions contemplated by the Exclusivity Agreement
      and Letter of Intent, or the Letter of Intent, dated September 7, 2006 by and
      among Riata Energy, Inc. (now known as SandRidge Energy, Inc.), AREH and
      us&#160;are completed and NEG Oil &amp; Gas exercises the redemption right under
      Section 5.4 of the NEG Holding Operating Agreement, NEGI would transfer its
      membership interest in NEG Holding to NEG Oil &amp; Gas or one of its affiliates
      and NEG Oil &amp; Gas would cause to be delivered to NEGI a payment of
      approximately $261.1 million, which the parties agree is the amount owed to
      NEGI
      for its interest in NEG Holding pursuant to Section 5.4 of the NEG Holding
      Operating Agreement. The payment would be adjusted to take into consideration
      the accrual of interest, after November 1, 2006, on NEGI&#8217;s 10.75% senior notes
      due 2007.</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">In
      addition, under the agreement, NEGI, NEG Oil &amp; Gas, NEG and AREH each agree
      that no action taken in furtherance of the transactions contemplated by the
      Letter of Intent will be deemed a breach of the Agreement and Plan of Merger,
      or
      the Merger Agreement, dated December 7, 2005 by and among NEGI, NEG Oil &amp;
Gas, NEG and AREH. </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">Pursuant
      to the agreement, the Merger Agreement will automatically terminate upon the
      transfer of NEGI&#8217;s membership interest in NEG Holding. At the time the payment
      is delivered to NEGI with respect to its membership interest in NEG Holding,
      as
      described above, any assets or property of NEG Oil &amp; Gas and its
      subsidiaries owned by them but in the possession of NEGI will be transferred
      and
      delivered to NEG Oil &amp; Gas or its subsidiaries.</font></div>
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      cannot be any assurance that the redemption or the transactions contemplated
      by
      the Letter of Intent will occur.</font></div>
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      summary of the agreement is qualified in its entirety by reference to the full
      text of the agreement filed herewith as an exhibit.</font></div>
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      9 - Financial Statements and Exhibits</strong></font></div>
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      10.1 - </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement,
      dated as of October 25, 2006 by and among National Energy Group, Inc., NEG
      Oil
&amp; Gas LLC, NEG, Inc. and American Real Estate Holdings Limited
      Partnership.</font></div>
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    <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
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      duly authorized.</font></div>
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              <td align="left" valign="top" width="34%">
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            <tr>
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                  Real Estate Partners, L.P.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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      <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">4</font></div>
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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v055799_ex10-1.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vintage-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
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  <body bgcolor="#ffffff">
    <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">Exhibit
      10.1</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"><u>AGREEMENT</u></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: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement is being entered into as of October 25, 2006 (this &#8220;Agreement&#8221;), by
      and among National Energy Group, Inc. (the &#8220;Company&#8221;), NEG Oil &amp; Gas LLC
      (&#8220;NEG Oil &amp; Gas&#8221;), NEG, Inc. (&#8220;IPOCO&#8221;) and American Real Estate Holdings
      Limited Partnership (&#8220;AREH&#8221;). All capitalized terms used but not defined herein
      shall have the meanings given such terms in the Agreement and Plan of Merger
      dated as of December 7, 2005 (the &#8220;Merger Agreement&#8221;), by and among the Company,
      NEG Oil &amp; Gas, IPOCO and AREH.</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      this Agreement has been duly considered and approved by the Special Committee,
      following its consideration of all relevant facts, circumstances and
      alternatives and its consultation with its financial and legal advisors, and
      such committee has recommended that the Company Board adopt and approve this
      Agreement.</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the Company Board, based on the recommendation of the Special Committee, has
      approved and adopted this Agreement and the transactions contemplated
      hereby.</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      it is anticipated that, assuming the purchase of the membership interests
      contemplated in Section 3 occurs, the Company will distribute to its common
      stockholders (through a dividend or tender offer) approximately $37
      million.</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NOW,
      THEREFORE, in consideration of the foregoing premises and the representations,
      warranties, covenants and agreements herein contained, and intending to be
      legally bound hereby, the Company, NEG Oil &amp; Gas, IPO Co. and AREH hereby
      agree as follows:</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      of
      the undersigned acknowledges and agrees that no action by any party in
      furtherance of the transactions contemplated by that certain Exclusivity
      Agreement and Letter of Intent dated September 7, 2006 (the &#8220;Letter&#8221;), by and
      among AREH, AREP and Riata Energy, Inc. (including, without limitation, the
      NEG
      Holding Purchase and the consummation of the Transaction or the Restructuring
      (as such capitalized terms are defined in the Letter)), shall in any event
      be or
      be deemed to be a breach of the Merger Agreement or any representations,
      warranties, covenants or other provisions thereof (including, without
      limitation, Section 4.2 thereof).</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      of
      the undersigned (including the Company, which, as contemplated in Section 6.1(a)
      of the Merger Agreement, is acting hereunder at the direction of the Special
      Committee) agrees that the Merger Agreement shall terminate pursuant to Section
      6.1(a) thereof, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">automatically,
      without any further action required, upon the transfer</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      of all
      of the Company&#8217;s membership interest in NEG Holding LLC (&#8220;NEG Holding&#8221;) as
      provided in Section 3 below.</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="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">In
      recognition of the fact that, as contemplated in the Letter, NEG Oil &amp; Gas
      or its Affiliate intends to purchase or to cause NEG Holding to purchase (such
      purchaser, the "Interest Buyer") all of the Company&#8217;s membership interest in NEG
      Holding pursuant to Section 5.4 of the NEG Holding Operating Agreement in
      connection with the closing, if any, of AREP&#8217;s transaction with Riata Energy,
      Inc. contemplated in the Letter:</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(A)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Company hereby represents, warrants, acknowledges and agrees that:</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: 144pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Company owns its membership interest in NEG Holding and all rights under the
      NEG
      Holding Operating Agreement, all as set forth in the NEG Holding Operating
      Agreement, free and clear of all liens, claims and encumbrances (other than
      liens in favor of NEG Oil &amp; Gas in connection with the NEG Operating LLC
      credit facility (the &#8220;AREP Liens&#8221;));</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: 144pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">effective
      upon delivery of notice (the &#8220;Exercise Notice&#8221;) by NEG Oil &amp; Gas to the
      Company (which will be effective upon receipt of a facsimile copy thereof by
      the
      Company) stating that the purchase rights under Section 5.4 of the NEG Holding
      Operating Agreement are being exercised by the Interest Buyer and the payment
      of
      the sum specified in Section 4(B) below: (x) all right, title and interest
      of
      the Company in NEG Holding shall automatically be and be deemed to be,
      transferred, assigned conveyed and sold to the Interest Buyer and the Company
      shall cease to be a member of NEG Holding or have any rights, powers or
      interests therein or under the NEG Holding Operating Agreement and (y) the
      Company will cease to have (and releases and shall be deemed to have released):
      (I) any right to receive any payment or distribution from NEG Holding or its
      subsidiaries or (II) any other right or claim with respect to NEG Holding or
      its
      subsidiaries, in the case of each of (I) and (II) associated with, arising
      out
      of or relating to its membership interests in NEG Holding, other than the right
      to receive the payment contemplated in Section 4(B) below.</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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(B)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NEG
      Oil
&amp; Gas agrees that upon delivery of the Exercise Notice: (i) the Interest
      Buyer will cause to be delivered to the Company the sum of
      $261,124,876</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Symbol"><sup>*</sup></font><font style="DISPLAY: inline">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (the
      "Payment"), which the parties agree is the amount owing to the Company under
      Section 5.4 of the NEG Holding Operating Agreement; and (ii) the AREP Liens
      will
      be released and terminated. Upon receipt of such payment the Company will pay
      in
      full the amount of principal and outstanding interest owing under the Company&#8217;s
      10.75% senior notes due 2006 (the "Bonds"), the principal amount of which is
      approximately $148.6 million. As a result, after payment of the Bonds the
      Company will retain approximately $112,487,876 from the Payment.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div>&#160;</div>
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        </div>
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                  <td style="width: 18pt;">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">*</font></div>
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                  <td>
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                      above amount assumes that the closing occurs on November 1,
                      2006. If it
                      occurs on a different date then the price will be adjusted
                      to take into
                      account the appropriate accrual of interest on the Bonds (as
                      defined
                      above) and the appropriate distribution to NEG Oil &amp; Gas under Article
                      VI of the NEG Holding Operating
                      Agreement.</font></div>
                  </td>
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      the
      time the Payment is delivered, automatically and without any further action
      necessary: (i) the management agreements between the Company and each of
      National Onshore LP, National Offshore LP and NEG Operating LLC will be
      terminated; and (ii) any assets or property of NEG Oil &amp; Gas and its
      subsidiaries owned by them but in the possession of the Company (including,
      without limitation, information technology, software and data relevant to the
      oil and gas operations of NEG Oil &amp; Gas or its subsidiaries) will be
      transferred and delivered to NEG Oil &amp; Gas or its subsidiaries, as
      designated 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>
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      provisions of this Agreement constitute an agreement separate from the Merger
      Agreement and shall survive any termination of the Merger Agreement.
</font></div>
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      Agreement may be executed through the use of separate signature pages or in
      any
      number of counterparts and all such counterparts shall be deemed one and the
      same instrument.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement shall be deemed to be made in and in all respects shall be
      interpreted, construed and governed by and in accordance with the law of the
      State of Delaware without regard to the conflict of law principles
      thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[The
      balance of this page has been left blank intentionally.]</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#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">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IN
      WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
      date first written above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NATIONAL
      ENERGY GROUP, INC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; 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/
      Bob G. Alexander</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Bob
      G. Alexander </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title:
      President</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NEG
      OIL
&amp; GAS LLC</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      AREP
      O &amp; G Holding LLC, its sole member</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      AREP
      Oil &amp; Gas Holding LLC, its sole member</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      American Real Estate Holdings Limited Partnership, its </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sole
      member</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      American Property Investors, Inc., its general partner</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; 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/
      Keith Meister</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; 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 Meister</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></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: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NEG,
      INC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; 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/
      Keith Meister</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Keith Meister</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title:
      Chief Executive Officer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; 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: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; 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/
      Keith Meister</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Keith Meister</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><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>
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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">[Signature
      page to Agreement among National Energy Group, Inc., NEG Oil &amp; Gas LLC,
</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">NEG,
      Inc.
      and American Real Estate Holdings Limited Partnership]</font></div>
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