Unassociated Document


    Exhibit
      10.1

    AGREEMENT

    


    This
      Agreement is being entered into as of October 25, 2006 (this “Agreement”), by
      and among National Energy Group, Inc. (the “Company”), NEG Oil & Gas LLC
      (“NEG Oil & Gas”), NEG, Inc. (“IPOCO”) and American Real Estate Holdings
      Limited Partnership (“AREH”). 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 “Merger Agreement”), by and among the Company,
      NEG Oil & Gas, IPOCO and AREH.

     

    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.

     

    WHEREAS,
      the Company Board, based on the recommendation of the Special Committee, has
      approved and adopted this Agreement and the transactions contemplated
      hereby.

     

    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.

     

    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 & Gas, IPO Co. and AREH hereby
      agree as follows:

     

    1. 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 “Letter”), 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).

     

    2. 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, automatically,
      without any further action required, upon the transfer
      of all
      of the Company’s membership interest in NEG Holding LLC (“NEG Holding”) as
      provided in Section 3 below.

     

    3. In
      recognition of the fact that, as contemplated in the Letter, NEG Oil & Gas
      or its Affiliate intends to purchase or to cause NEG Holding to purchase (such
      purchaser, the "Interest Buyer") all of the Company’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’s transaction with Riata Energy,
      Inc. contemplated in the Letter:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (A) the
      Company hereby represents, warrants, acknowledges and agrees that:

     

    (i) 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 & Gas in connection with the NEG Operating LLC
      credit facility (the “AREP Liens”));

     

    (ii) effective
      upon delivery of notice (the “Exercise Notice”) by NEG Oil & 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.

     

    (B) NEG
      Oil
& 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* 
      (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’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.

    
       

      
        
          

        

        
          
            	 	
                    *

                  	
                    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 & Gas under Article
                      VI of the NEG Holding Operating
                      Agreement.

                  


          

           

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4. At
      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 & 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 & Gas or its subsidiaries) will be
      transferred and delivered to NEG Oil & Gas or its subsidiaries, as
      designated by NEG Oil & Gas.

     

    5. The
      provisions of this Agreement constitute an agreement separate from the Merger
      Agreement and shall survive any termination of the Merger Agreement.


     

    6. This
      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.

     

    7.
       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.

     

    


     

     

    [The
      balance of this page has been left blank intentionally.]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
      date first written above.

    


    NATIONAL
      ENERGY GROUP, INC.

    


    


    By:
      /s/
      Bob G. Alexander

    Name:
      Bob
      G. Alexander 

    Title:
      President

    


    


    NEG
      OIL
& GAS LLC

    By:
      AREP
      O & G Holding LLC, its sole member

    By:
      AREP
      Oil & Gas Holding LLC, its sole member

    By:
      American Real Estate Holdings Limited Partnership, its  sole
      member

    By:
      American Property Investors, Inc., its general partner

    


    


    By:
      /s/
      Keith Meister

    Name:
      Keith Meister

    Title:
      Principal Executive Officer

    


    


    NEG,
      INC.

    


    


    By:
      /s/
      Keith Meister

    Name:
      Keith Meister

    Title:
      Chief Executive Officer

    


    


    AMERICAN
      REAL ESTATE HOLDINGS LIMITED PARTNERSHIP

    By:
      American Property Investors, Inc.

    


    


    By:
      /s/
      Keith Meister

    Name:
      Keith Meister

    Title:
      Principal Executive Officer

    


    


    


    [Signature
      page to Agreement among National Energy Group, Inc., NEG Oil & Gas LLC,


    NEG,
      Inc.
      and American Real Estate Holdings Limited Partnership]