Document:

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                                                                   EXHIBIT 10.53

                           PURCHASE AND SALE AGREEMENT

                                     BETWEEN

                           NATIONAL ENERGY GROUP, INC.

                                    AS SELLER

                                   ----------

                                       AND

                                ARNOS CORPORATION

                                   ----------

                                    AS BUYER

                                      DATED

                              AS OF NOVEMBER 1,1999

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                          PURCHASE AND SALE AGREEMENT

     This Purchase and Sale Agreement ("AGREEMENT") is entered into this __ day
of November, 1999, by and between NATIONAL ENERGY GROUP, INC. ("SELLER"), whose
mailing address is 1400 One Energy Square, 4925 Greenville Avenue, Dallas, Texas
75206, and Arnos Corporation ("BUYER"), whose mailing address is 767 5th Avenue,
47th Floor, New York, New York 10153. Seller and Buyer are sometimes referred to
herein individually as a "PARTY," and collectively as the "PARTIES."

                              W I T N E S S E T H:

     WHEREAS, Seller is engaged in the business of exploring for, developing,
and producing oil, gas and other hydrocarbons from onshore and offshore areas of
the United States for its own account and for the joint account of itself and
others; and

     WHEREAS, Seller is the debtor in the pending bankruptcy proceeding in Case
No. 398-80258-RCA-11 ("CASE") in the United States District Court for the
Northern District of Texas (the "COURT") and is subject to the jurisdiction
thereof; and

     WHEREAS, pursuant to an order dated October 18, 1999, the Court has
approved certain bid procedures (the "BID PROCEDURES") attached hereto and
incorporated herein by reference as Exhibit A-1 for the sale by auction of
Seller's Oil and Gas Properties and Assets (as such terms are hereafter
defined), the terms and provisions of which are hereby incorporated by reference
herein as though set forth in their entirety; and

     WHEREAS, CIBC World Markets Corp. ("CIBC") has been engaged by Seller and
the Official Creditors Committee appointed by the Court to market Seller's Oil
and Gas Properties and Assets; and

     WHEREAS, Buyer acknowledges receipt of the Bid Procedures relating to the
purchase and sale of Assets, and agrees to perform in accordance with the terms
and conditions of this Agreement and any order of the Court;

     NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties mutually agree as
follows:

     1. ASSETS TO BE SOLD AND PURCHASED. Seller agrees to sell and Buyer agrees
to purchase, for the consideration hereinafter set forth, and subject to the
terms and provisions herein contained, the following described properties,
rights and interests:

        (a) All of Seller's right, title and interest in and to the oil, gas
     and/or mineral leases described in Exhibit A hereto, any ratifications
     and/or amendments to such leases

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     (whether or not such ratifications or amendments are described in Exhibit
     A), subject to the exceptions and reservations contained in Exhibit A; and

        (b) Without limitation of the foregoing, all of Seller's right, title
     and interest (of whatever kind or character, whether legal or equitable,
     and whether vested or contingent) in and to the oil, gas and other minerals
     in and under or that may be produced from the lands or leases described in
     Exhibit A hereto, including, without limitation, interests in all oil, gas
     and/or mineral leases covering such lands, overriding royalties, production
     payments and net profits interests, fee mineral interests, fee royalty
     interests and all other interests in such oil, gas and other minerals, even
     though Seller's interest in such oil, gas and other minerals may be
     incorrectly described in, or omitted from, such Exhibit A but subject in
     each case to the exceptions and reservations contained in such Exhibit A;
     and

        (c) All of Seller's right, title and interest in and to, or otherwise
     derived from, all presently existing and valid oil, gas and/or mineral
     unitization, pooling, and/or communitization agreements, declarations
     and/or orders and in and to the properties covered and the units created
     thereby (including, without limitation, all units formed under orders,
     rules, regulations, or other official acts of any federal, state, or other
     authority having jurisdiction, and voluntary unitization agreements,
     designations and/or declarations) relating to the properties described in
     subsections (a) and (b) above; and

        (d) Subject to Section 1(g) below, all of Seller's right, title and
     interest in and to all presently existing and valid and, if necessary,
     affirmed rights-of-way, easements, licenses, permits, servitudes, surface
     leases and other surface rights, which relate to any of the Oil and Gas
     Properties described in subsections (a), (b) and (c) above; and

        (e) All of Seller's right, title and interest in and to all materials,
     supplies, machinery, equipment, improvements and other personal property
     and fixtures (including, but not by way of limitation, all wells, wellhead
     equipment, pumping units, flowlines, tanks, buildings, injection
     facilities, saltwater disposal facilities, compression facilities,
     gathering systems, and other equipment) located on the properties described
     in subsections (a), (b), (c), and (d) above and used in connection with
     the exploration, development, operation or maintenance thereof; and

        (f) All of Seller's original lease files, abstracts and title
     opinions, production records, well files, accounting records (but not
     including general financial accounting or tax accounting records), electric
     and all other logs, engineering files, proprietary geological and
     geophysical maps, data and records (subject to any contractual or other
     restrictions relating to the transfer of such data and records), and all
     other files, documents and records which relate to the Assets, subject to
     Seller's right to retain copies of the same, at Seller's expense; and

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         (g) All of Seller's interest in executory contracts, including, without
     limitation, service agreements, operating agreements, oil and gas
     production, gas gathering, transportation, treating, processing, and
     similar such contracts and related contracts insofar as they pertain to the
     Oil and Gas Properties in this Agreement, which will be assumed, to the
     extent requested by the Seller and Buyer in accordance with paragraph 17.3
     and assigned and conveyed to Buyer pursuant to Section 365 of the
     Bankruptcy Code (11 U.S.C. Section 101, et seq., herein the "BANKRUPTCY
     CODE") (collectively referred to herein as the "RELATED CONTRACTS"), less
     and except those contracts listed on Schedule 1 hereto or those contracts
     submitted by Buyer(s) on or before November 5, 1999 and agreed to by Seller
     and the Official Creditors' Committee ("Committee") to be added to Schedule
     1, which shall be rejected by Seller; and

         (h) All proceeds, benefits, income or revenue attributable to the
     Assets, from and after November 1, 1999 (including joint interest billings
     under applicable operating agreements and proceeds from the sale of oil and
     gas attributable to the Oil and Gas Properties from and after November 1,
     1999) shall belong to Buyer, and all such proceeds, benefits, income and
     revenue attributable to the Assets prior to November 1, 1999 shall belong
     to Seller. If there are production imbalances related to the Oil and Gas
     Properties, Seller shall transfer to Buyer such imbalances effective as of
     November 1, 1999; and

         (i) All of Seller's interest in and to all claims, causes of actions
     and rights against third parties in connection with, arising out of, or
     related to, the ownership or operation of the Assets prior to the Closing
     Date; provided, however, that all claims of Seller against officers and
     directors, outside accountants, and claims of the type covered by the
     Bankruptcy Code, including but not limited to those in Sections 544-550
     thereof, shall be retained by Seller's bankruptcy estate; and

         (j) All funds held, allocated, deposited, escrowed, or set aside by
     Seller in connection with actual or potential Environmental Defects
     (hereafter defined).

The interests of the Seller in the properties and interests specified in the
foregoing subsections (a), through (h) are herein sometimes collectively called
the "OIL AND GAS PROPERTIES," and the interests of the Seller in the Oil and Gas
Properties and interests specified in the foregoing subsections (a) through (j)
are herein sometimes collectively called the "ASSETS."

     1.1 OWNERSHIP OF PRODUCTION FROM THE OIL AND GAS PROPERTIES AND OTHER
ASSETS.

         1.1.1 Production Before November 1, 1999.

               (a) Seller will own all merchantable oil, gas, condensate and gas
         liquids ("HYDROCARBONS") produced from or attributable to the Oil and
         Gas Properties before November 1, 1999. If; on the Closing Date,
         Hydrocarbons produced from the Oil and Gas Properties and Assets before
         November 1, 1999 are stored on the Oil and

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         Gas Properties unit stock tanks or are located within unit gathering
         lines or production facilities upstream of the sale or custody transfer
         meters of the Seller or in connection with Hydrocarbon production from
         the Oil and Gas Properties, Buyer shall purchase from Seller the
         merchantable stock tank oil and/or gas above the pipeline connections
         in the stock tanks at the field posting price for such oil and gas or
         such price being paid for production under the Seller's relevant
         existing sales contract of each such property existing as of the
         Effective Date, and any pipeline inventory at the mutually agreed upon
         market price of such inventory. Buyer will pay Seller for the stock
         tank oil and any pipeline inventory related thereto as an adjustment to
         the Base Purchase Price at Closing. The stock tank oil and pipeline
         inventories will be gauged and measured as of 7:00 a.m. local time
         where the Oil and Gas Properties and Assets may be located on the
         Effective Date. Seller and Buyer will accept the lease or unit
         operator's tank gauge readings, meters, meter tickets or other
         inventory records of the stock tank oil and pipeline inventory.

               1.1.2 PRODUCTION AFTER NOVEMBER 1, 1999. Buyer will own all
Hydrocarbons produced from the Oil and Gas Properties and Assets from and after
November 1, 1999, assuming that the December 6, 1999 Closing Date occurs.
Subject to any continuing sale obligations under Related Contracts, Buyer may
sell Hydrocarbons produced from the Oil and Gas Properties on and after the
Closing Date as it deems appropriate.

     2. PRICE FOR ASSETS. The initial, unadjusted Purchase Price to be paid by
Buyer to Seller for the Assets is Ninety-Six Million Two Hundred Fifty Thousand
and No/100 Dollars ($96,250,000.00) (excluding Lake Mongoulois and Mustang
Island, as defined in Schedule 2) (the "BASE PURCHASE PRICE"). In accordance
with the Bid Procedures, Buyer has previously tendered to an escrow account for
the benefit of Seller with Bank One Texas, N.A. ("Escrow Agent") the amount of
Three Million, Four Hundred Thousand and No/100 Dollars ($3,400,000.00) (the
"INITIAL DEPOSIT"). Buyer has deposited with the Escrow Agent an additional
escrow sum for the benefit of Seller in an additional amount of Six Million Two
Hundred Twenty Five Thousand and No/100 Dollars ($6,225,000.00)(the "ADDITIONAL
DEPOSIT"), which deposits shall together total 10% of the Base Purchase Price.

        2.1 ALLOCATION OF PURCHASE PRICE. The Buyer(s) and Seller agree that, on
or before the Closing Date, they will attempt to mutually agree as to the
allocation of the Base Purchase Price among each of the assets under the
Internal Revenue Code, as amended, and its regulations, including the relative
portions of those values attributable to leasehold costs and depreciable
equipment (the "Allocated Value"). If there is a disagreement concerning any
such allocation(s), such dispute will be resolved by the Court.

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     3. REPRESENTATIONS OF SELLER. Seller represents to Buyer that:

        (a) Seller is a corporation duly organized, legally existing, and in
     good standing under the laws of the State of Delaware. Seller is qualified
     to do business and is in good standing at Closing in each state in which
     the Assets are located where the laws of such state require a corporation
     owning the Assets located in such state to qualify to do business. Seller
     has, or will have at Closing, full power to enter into and perform its
     obligations hereunder, and has, or will have at Closing, taken all
     necessary action to authorize entering into this Agreement and to perform
     its obligations hereunder.

        (b) The Oil and Gas Properties and Assets shall be sold free and clear
     of all liens, claims, encumbrances, and interests pursuant to Section
     363(f) of the Bankruptcy Code in an order to be approved by the Court.

        (c) Other than requirements (if any) that consents to assignment, or
     waivers of preferential rights to purchase, be obtained from third parties,
     and except for approvals required to be obtained from governmental entities
     who are lessors under leases forming a part of the Oil and Gas Properties,
     or who administer such leases on behalf of such lessors, which are
     customarily obtained post-closing, or as otherwise set forth on Schedule
     3(c), neither the execution and delivery of this Agreement, nor the
     consummation of the transactions contemplated hereby, nor the compliance
     with the terms hereof, will result in any default under any agreement or
     instrument to which Seller is a party or by which the Assets are bound, or
     violate any order, writ, injunction, decree, statute, rule or regulation
     applicable to Seller or to the Assets.

        (d) This Agreement and the Conveyance provided for herein to be
     delivered at Closing will, when executed and delivered, constitute the
     legal, valid, and binding obligation of Seller, except as subject to notice
     provisions and order of the Court.

        (e) Take-or-Pay Arrangements. Except with respect to Reliant Energy,
     Inc., gas balancing agreements, wells subject to calls on production, and
     preferential rights as set forth in Exhibit B, none of the Oil and Gas
     Properties are subject to any take or pay arrangements, advance payment or
     similar provision, whereby any party has the right to take production
     without full payment therefore, or at a reduced or prearranged price or to
     a call on production.

        (f) New Well Operations. From November 1, 1999 until Closing, Seller
     shall not make any election with respect to any operation for the drilling
     of any new well or the fracing, recompletion, deepening, reworking,
     plugging back, plugging and abandonment or other operation with respect to
     any well, unit or lease constituting part of the Oil and Gas Properties,
     without the prior written consent of Buyer (as the Winning Bidder), which
     consent will not be unreasonably withheld. Buyer shall respond promptly to
     any written requests for such consent.

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        (g) Maintenance of Interest. Seller will use its reasonable commercial
     efforts from the date of this Agreement until Closing, to maintain and
     operate the Assets in a reasonable and prudent manner, in compliance with
     law and orders of any governmental authority, to maintain insurance now in
     force with respect to the Assets, to pay when due all costs and expenses
     coming due and payable in connection with the Assets, and to perform all of
     the covenants and conditions contained in the Related Contracts. Without
     the prior written consent of Buyer, which consent will not be unreasonably
     withheld, Seller will not: (i) develop, maintain or operate the Assets in a
     manner inconsistent with prior operations or introduce any new method of
     operation or accounting with respect to the Assets; (ii) enter into any new
     agreements or commitments with respect to the Assets; (iii) incur any
     liabilities other than in the ordinary course for normal operating expenses
     on the Assets; (iv) abandon, or consent to abandonment of, any producing,
     shut-in or injection well located on the Assets, nor release or abandon all
     or any portion of the Assets; (v) modify or terminate any of the Assets or
     waive any right thereunder; (vi) encumber, sell or otherwise dispose of any
     of the Assets other than personal property that is replaced with equivalent
     property or consumed in the ordinary course of operation of the Assets and
     other than Hydrocarbons sold in the ordinary course of business; or (vii)
     enter into any new production purchase or sale agreement with a term
     greater than 30 days relating to the Assets. If selected as a Winning Bid,
     Buyer will respond promptly to any written requests for such consent.

        (h) Filings. Seller has timely filed or caused to be filed all federal,
     state, local and foreign tax and information returns, and all material
     reports, certificates and other instruments required by law.

        (i) Operating Agreements. Except as disclosed to Buyer, as to any and
     all operating agreements affecting any of the Oil and Gas Properties, each
     of which operating agreements constitutes a Related Contract: (i) there are
     no outstanding calls, advances or payments that have been advanced on
     behalf of or are due from Seller or that Seller has committed to make that
     have not been paid, (ii) there are no operations with respect to which
     Seller is a non-consenting party, and (iii) except for an emergency, and
     payment for any materials or services rendered prior to the date of this
     Agreement, Seller will not authorize any expenditure after the date of this
     Agreement without first obtaining the written consent to such expenditure
     from Buyer, once selected as a Winning Bid, which consent will not be
     unreasonably withheld, conditioned or delayed

     4. REPRESENTATIONS OF BUYER. Buyer represents to Seller that:

        (a) Buyer is a corporation duly organized and legally existing and under
     the laws of the State of Nevada, and as of the Closing, Buyer will be
     qualified to do business and in good standing in each of the states in
     which the Assets are located where the laws of such state would require a
     corporation owning the Assets located in such state to qualify to do
     business.

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        (b) Buyer has full power to enter into and perform its obligations under
     this Agreement and has taken all proper action to authorize entering into
     this Agreement and performance of its obligations hereunder.

        (c) Neither the execution and delivery of this Agreement, nor the
     consummation of the transactions contemplated hereby, nor the compliance
     with the terms hereof, will result in any default under any agreement or
     instrument to which Buyer is a party.

        (d) This Agreement and the Conveyance provided for herein to be
     delivered at Closing will, when executed and delivered, constitute the
     legal, valid, and binding obligation of Buyer, enforceable in accordance
     with its terms, except as limited by bankruptcy or other laws applicable
     generally to creditor's rights and as limited by general equitable
     principles.

        (e) There are no pending suits, actions, or other proceedings except the
     Seller's bankruptcy proceeding described in the recitals hereto, in which
     Buyer is a party which affect the execution and delivery of this Agreement
     or the consummation of the transactions contemplated hereby.

        (f) Buyer is a knowledgeable purchaser, sophisticated investor of oil
     and gas and has the ability to evaluate oil and gas properties, and in fact
     has evaluated the Assets for purchase, and is acquiring the Assets based
     upon its own evaluation, and for its own account and not with the intent to
     make a distribution within the meaning of the Securities Act of 1933 (and
     the rules and regulations pertaining thereto) or a distribution thereof in
     violation of any other applicable securities laws.

        (g) With regard to those Assets which Buyer seeks to operate, Buyer (or
     Buyer's contract operator) is qualified to operate such Assets under the
     applicable laws, rules and regulations of the jurisdiction in which such
     Assets are located, or Buyer, an affiliate or agent thereof; will become so
     qualified before operating such Assets.

     5. CERTAIN COVENANTS OF SELLER PENDING CLOSING. Between the Sale Hearing
(as defined in the Bid Procedures) and the Closing:

        (a) Seller will give Buyer and its attorneys and other representatives
     access at all reasonable times to the Assets and, at Seller's office, to
     Seller's records (including, without limitation, title files, division
     order files, well files, production records, accounting records, marketing
     files, equipment inventories, and production, severance and ad valorem tax
     records) pertaining to the ownership and/or operation of the Assets. Seller
     shall not be obligated to provide Buyer with access to any records or data
     which Seller considers to be proprietary or confidential to it, which would
     constitute a waiver of attorney-client privilege in any pending litigation,
     or which Seller cannot legally provide to Buyer without, in its opinion,
     breaching, or risking a breach of, confidentiality agreements with other
     parties.

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     Buyer recognizes and agrees that all materials made available to it
     (whether pursuant to this Section or otherwise) in connection with the
     transaction contemplated hereby are made available to it as an
     accommodation, and without representation or warranty of any kind as to the
     accuracy and completeness of such materials. Buyer waives and releases all
     claims against Seller, its parent or subsidiary companies or other
     affiliates, and its and their directors, officers, employees and agents,
     for injury to, or death of, persons or for damage to property arising in
     any way from the conduct of the investigations and examinations
     contemplated by this Section or the conduct of its employees, agents, or
     contractors in connection with such investigations and examinations (or the
     exercise of such rights of access). BUYER SHALL RELEASE, INDEMNIFY, DEFEND,
     AND HOLD HARMLESS SELLER, AND ITS PARENT OR SUBSIDIARY COMPANIES AND OTHER
     AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS,
     CONTRACTORS, AND AGENTS (HEREINAFTER COLLECTIVELY REFERRED TO AS THE
     "SELLER GROUP"), FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION,
     LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES (INCLUDING, WITHOUT
     LIMITATION, COURT COSTS AND ATTORNEYS' FEES), OR LIENS OR ENCUMBRANCES FOR
     LABOR OR MATERIALS ARISING OUT OF OR IN ANY WAY CONNECTED WITH SUCH ACCESS,
     EXAMINATIONS, OR INSPECTIONS. THE FOREGOING RELEASE AND INDEMNIFICATION
     SHALL APPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION,
     LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i)
     NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT
     NEGLIGENCE, ACTIVE NEGLIGENCE, OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT
     INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER
     INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.

        (b) In addition to its obligations under Section 3(g) of this Agreement,
     Seller will continue the operation of the Assets in the ordinary course of
     its business. Where Seller is not the operator of an Oil and Gas Property,
     Seller will continue to act as a non-operator in the ordinary course of its
     business. From and after the date of this Agreement, Seller will not sell
     or dispose of any portion of the Assets listed in Exhibit A except for the
     few miscellaneous assets listed in Schedule 5(b) without the prior consent
     of Buyer.

        (c) Seller will use reasonable efforts, consistent with industry
     practices in transactions of this type, to identify (i) all preferential
     rights to purchase and all rights to require that consents to assignment be
     obtained which would be applicable to the transactions contemplated hereby,
     and (ii) the parties holding such rights. In attempting to identify the
     same, Seller shall in no event be obligated to go beyond its own records.
     Seller will request from the parties so identified (and in accordance with
     the documents creating such rights) waivers of the preferential rights to
     purchase and requirements that consents to assignment be obtained which
     were so identified. Seller shall have no obligation hereunder other than to
     so attempt to identify such preferential rights and requirements for
     consents to

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     assignment and to so request such waivers, and shall in no event be under
     any obligation to obtain such waivers. Except to the extent that Buyer can
     establish that Seller failed to fulfill the obligations set forth above in
     this subsection, Buyer shall indemnify and hold Seller harmless from and
     against all claims, actions, liabilities, damages, losses, costs or
     expenses, including, without limitation, court costs and attorney's fees,
     whatsoever that arise out of the failure to obtain waivers of preferential
     rights to purchase or requirements for consents to assignment with respect
     to any transfer by Seller to Buyer of any part of the Assets and with
     respect to any subsequent transfers.

        (d) Notwithstanding any other provision in this Section, (i) Seller may
     take any action prohibited by this Section if reasonably necessary under
     emergency conditions provided that Buyer is notified as soon as practicable
     thereafter; (ii) except to the extent that a Title Defect (as hereinafter
     defined) may result therefrom, Seller shall have no liability to Buyer for
     any incorrect payment of delay rentals, royalties, shut-in royalties, or
     similar payments or for any failure to make such payments; and (iii)
     Seller's failure to comply with any of the requirements of this Section 5
     shall not be deemed to be a default by Seller hereunder or grant to Buyer
     the right not to close the transaction contemplated hereby, unless such
     failure has a material adverse effect upon the value of the Assets taken as
     a whole.

        (e) Seller shall give prompt written notice to Buyer of any notice of
     default (or written threat of default, whether disputed or denied by
     Seller) received or given by Seller subsequent to the Effective Date under
     any instrument or agreement affecting the Assets to which Seller is a party
     or by which it or any of the Assets is bound.

     6. DUE DILIGENCE/TITLE/ENVIRONMENTAL MATTERS

        (a) Due Diligence Investigation. Buyer shall, to the extent it deems
     appropriate, conduct, at its sole cost, risk, and expense, such title
     examination or investigation, and other examinations and investigations, as
     it may choose to conduct with respect to the Assets.

        (b) As used in this Agreement, the term "TITLE DEFECT" shall mean any
     matter, other than a "Permitted Encumbrance" (as hereinafter defined),
     which causes one or more of the following to be a correct statement:

                 (i) Seller's ownership of the Assets is such that, with respect
            to a well or unit listed on Exhibits A or B attached hereto, such
            ownership (a) is not sufficient to entitle it to receive its decimal
            share of the oil, gas and other hydrocarbons produced from, or
            allocated to, such well or unit which is at least that decimal share
            set forth on Exhibit B in connection with such well or unit in the
            column headed "NET REVENUE INTEREST" or (b) obligates it to bear its
            decimal share of the cost of operation of such well or unit (herein
            called the "OPERATING INTEREST") greater than the decimal share set
            forth on Exhibit B in connection with such well or unit in the

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            column headed "Operating Interest" (without a proportionate increase
            in Net Revenue Interest above that set forth on such exhibits); or

                (ii) Seller's ownership of an Oil and Gas Property is subject
            to an outstanding mortgage (other than that set forth in Section
            6(c)(xii)), deed of trust, or other enforceable lien or
            encumbrance, or other adverse claim or imperfection in title that is
            not resolved or cured by the 363 Order (as defined in Section 17
            hereinafter); or

                (iii) Seller has materially misrepresented the amount of any
            gas imbalances as to assets listed in Exhibit B.

                (iv) Seller has inaccurately represented outstanding
            preferential rights.

            (c) As used herein, the term "PERMITTED ENCUMBRANCE" shall mean any
     and all of the following:

                (i) The terms, conditions, restrictions, exceptions,
            reservations, limitations, and other matters contained in the
            agreements, instruments, and other documents which create or reserve
            to Seller its interest in any Asset, provided that the same do not
            reduce the Net Revenue Interest of Seller in the Asset affected
            thereby to less than that set forth on Exhibit B hereto;

                (ii) Royalties, overriding royalties (including, without
            limitation, those specifically described on Exhibit A hereto),
            division orders, reversionary interests, production payments, net
            profits interests, and similar burdens affecting any Oil and Gas
            Property if the net cumulative effect of such burdens does not
            operate to reduce the Net Revenue Interest in the Asset affected
            thereby to less than the Net Revenue Interest set forth beside the
            same on Exhibit B hereto;

                (iii) Preferential rights to purchase and required third party
            consents to assignment and similar agreements with respect to which
            waivers or consents shall have been obtained from the appropriate
            parties, or the appropriate time period for asserting such rights
            shall have expired without an exercise of such rights;

                (iv) Liens for taxes and assessments which are not yet
            delinquent or which are being contested by Seller in good faith;

                (v) Rights existing under applicable laws (including without
            limitation statutory liens) or operating agreements or similar
            contracts to assert liens against the Assets, but not including
            liens and other rights which have actually been asserted, unless
            Seller disputes the validity of such liens or the amount claimed to
            be owed in

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            connection therewith, or such lien or other right is not enforceable
            against the interest of Seller;

                (vi) Conventional rights of reassignment requiring ninety (90)
            days or less notice to the holder of such rights;

                (vii) Easements, rights-of-way, servitudes, permits, surface
            leases, and other rights in respect to surface operations,
            pipelines, logging, canals, ditches, reservoirs, or the like;
            conditions, covenants, or other restrictions; easements of streets,
            alleys, highways, pipelines, telephone lines, power lines, railways,
            and other easements or rights-of-way on, over or with respect of any
            Asset which does not materially and adversely affect the Asset
            affected thereby or its current use;

                (viii) Any obligations or duties affecting an Asset to any
            municipality or public authority with respect to any franchise,
            grant, license, or permit and all applicable laws, rules, and order
            of any governmental authority;

                (ix) All rights to consent by, required notices to, filings
            with, or other action by governmental entities in connection with
            the sale or conveyance of oil and gas leases, permits, or interests
            therein, if the same are customarily obtained contemporaneously with
            or subsequent to such sale or conveyance;

                (x) Existing operating agreements, unit agreements, gas
            purchase contracts, and any and all other agreements which are
            customary in the oil and gas exploration, development, production,
            or extraction business or in the business of processing of gas and
            gas condensate, or production for the extraction of proper products
            therefrom, to the extent that the same do not reduce the Net Revenue
            Interest of Seller in the Asset affected thereby below that set
            forth on Exhibit B hereto, or increase the Operating Interest of the
            Seller in the affected Asset above that set forth on Exhibit B
            (without a proportionate increase is the corresponding Net Revenue
            Interest);

                (xi) That certain Mortgage, Security Agreement, Assignment of
            Production and Finance Statement effective as of September 1,
            1998, by National Energy Group, Inc. as Mortgagor for the use and
            benefit of Bank One, Texas N.A., Administrative Agent, filed and
            recorded in Iberville Parish, Louisiana on September 8, 1998 in
            Mortgage Book 319, Page 197 and Conveyance Book 511, Page 174,
            (herein called "Mortgage"); and

                (xii) Any matter waived or deemed to be waived by Buyer.

            (d) Title Defects. Should, as a result of such examinations and
     investigations, or otherwise, matters come to Buyer's attention which Buyer
     believes would constitute Title

                                       11

<PAGE>   13

     Defects, Buyer shall notify Seller in writing of such Title Defects as soon
     as practicable, but in no event later than sixty (60) days after the
     Closing. To be effective, Buyer's notice of Title Defects (a "TITLE DEFECT
     NOTICE") must include (i) a brief description of the matter constituting
     the Title Defect so asserted, (ii) the title opinion, other reports of
     experts, or other documentation on which Buyer's assertion of a Title
     Defect is based, (iii) such supporting documents reasonably necessary for
     Seller to verify the existence of any such Title Defect, and (iv) Buyer's
     estimate of the diminution in the value of the affected Asset resulting
     from such alleged Title Defect. In the event that Buyer notifies Seller of
     Title Defects, Seller (i) shall have the right (but not the obligation) to
     attempt to cure such Title Defects to the reasonable satisfaction of Buyer,
     or (ii) shall have the right to elect not to cure the Title Defect and
     adjust the Base Purchase Price as set forth in Section 7 below, subject to
     the limits of Section 6(h) below. Should the title opinion or other
     materials reviewed by Buyer indicate that Seller has a higher "Net Revenue
     Interest" than that specified on Exhibit (an "NRI INCREASE"), then Buyer
     shall inform Seller of the same as soon as possible and Seller will receive
     an appropriate accounting adjustment as set forth in Section 7 below.

        (e) Environmental Review. Seller has provided or caused to be provided
     to Buyer that Phase I environmental summary October 16, 1999 and prepared
     by LFC Environmental, Inc. covering certain of Seller's Oil and Gas
     Properties; provided, that Seller makes no representation or warranty as to
     the accuracy or completeness of such Phase I environmental summary. In
     addition, Buyer shall have the right, at its sole cost, risk, and expense,
     to conduct its own Phase I environmental assessment of the Assets during
     the period beginning November 1, 1999 and ending sixty (60) days after the
     Closing. As used herein, a Phase I environmental assessment shall consist
     of the following: Buyer and its agents shall have the right to enter upon
     the Assets and all buildings and improvements thereon during normal
     business hours, and physically inspect the same, contact all relevant
     local, state, and federal environmental agencies, and conduct a review of
     all public filings with respect to the Assets. WITHOUT THE PRIOR WRITTEN
     CONSENT OF SELLER, BUYER MAY NOT CONDUCT, OR CAUSE TO BE CONDUCTED, ANY
     SOIL, AIR, OR WATER TESTS, ANALYSES, SAMPLES, OR BORINGS WITH RESPECT TO
     ANY OF THE ASSETS, except, however, after Closing Buyer shall have the
     right to conduct any soil, air, or water tests, analyses, samples, or
     borings with respect to any of the Assets and any results from such
     investigation may be used as documentation to support an Environmental
     Defect Notice as provided in Section 6(t) below.: Buyer shall provide
     Seller with a copy of any environmental assessment promptly upon Buyer's
     completion thereof; including any reports, data, and conclusions. Buyer
     shall keep any data or information acquired by such examinations and the
     results of all analyses of such data and information strictly confidential
     and shall not disclose same to any person or agency without the prior
     written approval of Seller. BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND
     HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND ALL LOSS, COST,
     DAMAGE, EXPENSE, OR LIABILITY WHATSOEVER, INCLUDING ATTORNEYS' FEES,
     ARISING OUT OF ANY INJURY TO OR DEATH OF PERSONS OR DAMAGE TO PROPERTY
     OCCURRING IN, ON, OR ABOUT THE ASSETS AS A RESULT OF SUCH

                                       12

<PAGE>   14

     ENVIRONMENTAL ASSESSMENT (EXCEPT ANY SUCH INJURIES OR DAMAGES CAUSED SOLELY
     BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MEMBER OF THE SELLER
     GROUP).

        (f) Environmental Defects. If; as a result of Phase I or Phase II, as
     provided in Section 6(e) above, examinations and investigations, or
     otherwise, matters come to Buyer's attention which Buyer believes would
     constitute a violation of an Applicable Environmental Law (hereafter
     defined) (an "ENVIRONMENTAL DEFECT"), Buyer shall notify Seller in writing
     of such Environmental Defect as soon as practicable (the "ENVIRONMENTAL
     DEFECT NOTICE"), but in no event later than sixty (60) days after the
     Closing. To be effective, Buyer's Environmental Defect Notice must include
     (i) a brief description of the Environmental Defect constituting the
     violation of Applicable Environmental Law so asserted, (ii) the reports of
     experts or other documentation on which Buyer's Environmental Defect Notice
     is based, (iii) such supporting documents reasonably necessary for Seller
     to verify the existence of any violation of an Applicable Environmental
     Law, and (iv) Buyer's estimate of the diminution in the value of the
     affected Asset resulting from such alleged Environmental Defect, or if such
     exceeds the diminution in value, the amount to remediate such alleged
     Environmental Defect. In the event that Buyer notifies Seller of
     Environmental Defects, Seller (i) shall have the right (but not the
     obligation) to attempt to cure such Environmental Defects to the reasonable
     satisfaction of Buyer; or (ii) shall have the right to elect not to cure
     the Environmental Defect and adjust the Base Purchase Price as set forth in
     Section 7 below, subject to the limits of Section 6 (h) below. Any plugging
     and abandonment obligation with respect to any well, and any surface
     restoration liability with respect to any oil, gas and/or mineral lease
     shall not constitute or be deemed an Environmental Defect

        (g) Environmental Indemnity and Assumption. As of sixty (60) days after
     the Closing Date, Buyer shall assume full responsibility for, and (except
     to the extent that Buyer shall have received a reduction in the Base
     Purchase Price pursuant to this Agreement by virtue of an Environmental
     Defect) agrees to indemnify, hold harmless, and defend the Seller Group
     from, and against all loss, liability, claims, fines, expenses, costs
     (including attorney's fees and expenses), and causes of action caused by or
     arising out of any violation of any environmental law, rule, or regulation
     (including common law), relating to the protection of health or the
     environment of any kind or character ("APPLICABLE ENVIRONMENTAL LAW(S)")
     or the presence, disposal, release or threatened release of any Hazardous
     Substance (as the terms "HAZARDOUS SUBSTANCE" and "RELEASE" are defined in
     the Comprehensive Environmental Response, Compensation and Liability Act,
     42 U.S.C. Sec. 9601, et seq.) from, with respect to, or in connection with
     the Assets into the atmosphere, into or upon land (surface or subsurface),
     or into any water course or body of water, including groundwater, whether
     or not attributable to the Seller's activities or the activities of third
     parties (regardless of whether or not the Seller was or is aware of such
     activities) and regardless of whether the event or occurrence was prior to,
     during, or after the period of Seller's ownership of the Assets. This
     indemnification and assumption shall

                                       13

<PAGE>   15

     apply, but is not limited to, liability for response actions undertaken
     pursuant to the Comprehensive Environmental Response, Compensation and
     Liability Act or any other Applicable Environmental Law or regulation.

        (h) Defect Basket/Limits. Notwithstanding any other provision contained
     herein, with respect to any Asset, the amount claimed by Buyer in any Title
     Defect Notice related to a given Asset shall not exceed the Allocated Value
     (as defined in Section 7 below) of such Asset. The amount claimed by Buyer
     for the remediation of an Environmental Defect shall not be limited to the
     Allocated Value of the affected Asset, but is subject to the limits set
     forth in this section. If the aggregate Base Purchase Price reduction which
     would result from all Title Defects and Environmental Defects does not
     exceed One Million Dollars ($1,000,000.00) (the "DEFECT BASKET AMOUNT"),
     then the Base Purchase Price shall not be adjusted. If the total amount of
     the Base Purchase Price reduction agreed to by the Parties (or determined
     by the Court) exceeds the Defect Basket Amount, the Base Purchase Price
     shall be reduced in the amount by which the aggregate amount of Title
     Defects and Environmental Defects exceeds One Million Dollars
     ($1,000,000.00); provided, however, regardless of the total amount of Title
     and Environmental Defects asserted by Buyer and agreed to by Seller (or
     determined by the Court) in excess of the Defect Basket Amount, in no event
     shall the Base Purchase Price be reduced by an amount greater than Two
     Million Dollars ($2,000,000.00).

     7. CERTAIN BASE PURCHASE PRICE ADJUSTMENTS. If, as a part of the due
diligence review provided for in Section 6 above, (i) Title Defects or
Environmental Defects are presented to Seller and Seller is unable (or
unwilling) to cure such Title or Environmental Defects, (ii) Buyer has elected
to treat an Oil and Gas Property affected by a casualty loss as if it was an Oil
and Gas Property affected by a Title Defect, or (iii) there be a NRI Increase,
then:

        (a) Subject to Section 6 (h) above, Buyer and Seller shall, with
     respect to each Oil and Gas Property affected by such matters, attempt to
     agree upon an appropriate value to account for such matters; and

        (b) with respect to each Oil and Gas Property as to which Buyer and
     Seller are unable to agree upon appropriate adjustment with respect to all
     such matters affecting such Oil and Gas Property, then:

                 (i) If the Title Defect is a mortgage, lien, encumbrance or
            other charge which is undisputed and liquidated in amount, then
            (subject to the provisions of paragraph (iv) below) the value shall
            be the amount necessary to be paid to remove the Title Defect from
            the affected Asset; provided, however, that an order conveying such
            Oil and Gas Properties to Buyer free and clear of liens or interests
            under Section 363(f) of the Bankruptcy Code shall suffice to cure or
            resolve such defect ("363(f) ORDER");

                                       14

<PAGE>   16

                 (ii) If there shall be a Title Defect or NRI Increase which (a)
            represents a discrepancy between (1) the Net Revenue Interest to
            which Seller is entitled to receive from any Asset and (2) the Net
            Revenue Interest stated on Exhibit B, and (b) there is a Operating
            Interest change proportionate to the change in the Net Revenue
            Interest resulting from the Title Defect or NRI Increase, then the
            amount of the adjustment shall be the product of the Allocated Value
            as set forth on Exhibit B, multiplied by a fraction, the numerator
            shall be the change in the Net Revenue Interest and the denominator
            of which shall be the Net Revenue Interest set forth on Exhibit B;
            or

                 (iii) If the Title Defect represents an obligation,
            encumbrance, burden, discrepancy, or charge upon or other defect in
            title to the affected Asset of a type not described in paragraphs
            (i) or (ii) above, the adjustment amount shall be determined by
            taking into account the Allocated Value of the Asset so affected,
            the portion of the Asset affected by the Title Defect, the legal
            effect of the Title Defect, the potential economic effect of the
            Title Defect over the life of the affected Asset, and such other
            factors as are necessary to make a proper evaluation of the value of
            the Title Defect;

                 (iv) With respect to Environmental Defects, the value shall be
            determined by taking into account the Allocated Value of the Asset
            so affected, the portion of the Asset affected by the Environmental
            Defect, the legal effect of the Environmental Defect (including
            governmental agency-imposed fines or sanctions, if any), the
            potential economic effect of the Environmental Defect over the life
            of the affected Asset, and such other factors as are necessary to
            make a proper evaluation of the value of the Environmental Defect
            including the cost of remediation;

                 (v) The Parties shall negotiate in good faith to reach
            agreement with respect to the existence of and diminution in value
            caused by Title and Environmental Defects with respect to the Assets
            hereunder. If the Parties are unable to agree upon an appropriate
            adjustment within 45 days following notice of such Title and/or
            Environmental Defect in light of the factors set forth above, then,
            subject to Section 6 (h) and the final paragraph of this Section
            7, either Party may elect to submit a dispute regarding the value of
            any Environmental or Title Defect(s) to the Court for final
            determination.

        Any Base Purchase Price adjustment hereunder shall be made as a
        post-Closing accounting adjustment in accordance with Section 13 below.

     8. CERTAIN COVENANTS OF BUYER AFTER CLOSING. From and after the date of
this Agreement, Buyer will give Seller and its attorneys and other
representatives access at all reasonable times and upon

                                       15

<PAGE>   17

reasonable notice for a period of two (2) years from and after the Closing, to
all files and records (including all computer records) delivered by or on behalf
of Seller in connection with the transaction contemplated hereby, and shall
permit Seller to make copies of any such files and records. Should the Assets be
subsequently transferred by Buyer, Buyer agrees to take all action in its
contractual arrangements relating to such transfer necessary to allow Seller to
have continued access to all such files and records.

     9.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of
Buyer under this Agreement are subject to each of the following conditions being
met:

         (a) Each and every representation of Seller under this Agreement shall
     be true and accurate in all material respects as of Closing except as to
     changes specifically contemplated by this Agreement or consented to by
     Buyer.

         (b) Seller shall have performed and complied in all material respects
     with (or compliance therewith shall have been waived by Buyer) each and
     every covenant, agreement, and condition required by the Court and this
     Agreement to be performed or complied with by Seller prior to or at the
     Closing.

         (c) No suit, action, or other proceedings shall, on the date of
     Closing, be pending or threatened before any court or governmental agency
     seeking to restrain, prohibit, or obtain damages or other relief in
     connection with the consummation of the transactions contemplated by this
     Agreement.

         (d) The 363(t) and 365 Orders of the Court shall have been entered
     authorizing the transaction(s) contemplated by this Agreement, and either
     have become final orders or orders as to which an appeal has been filed but
     no stay and no supersedes or other form of bond in an amount of the Base
     Purchase Price has been filed or posted in the proper Court.

         (e) Seller has obtained a resolution from its board of directors
     authorizing the sale of the Assets.

     10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of
Seller under this Agreement are subject to each of the following conditions
being met:

         (a) Each and every representation of Buyer under this Agreement shall
     be true and accurate in all material respects as of Closing except as to
     changes specifically contemplated by this Agreement or consented to by
     Seller.

         (b) Buyer shall have performed and complied in all material respects
     with (or compliance therewith shall have been waived by Seller) each and
     every covenant, agreement, and condition required by the Court and this
     Agreement to be performed or complied with by Buyer prior to or at the
     Closing.

                                       16

<PAGE>   18

         (c) No suit, action or other proceedings shall, on the date of Closing,
     be pending or threatened before any court or governmental agency seeking to
     restrain, prohibit, or obtain damages or other relief in connection with
     the consummation of the transactions contemplated by this Agreement.

         (d) An order of the Court authorizing the transaction(s) described in
     this Agreement shall have been entered and either have become final orders
     or orders as to which an appeal has been filed but no stay and no
     supersedes or other form of bond in an amount of the Base Purchase Price,
     as the case maybe, has been filed or posted in the proper Court.

     11. TERMINATION OF AGREEMENT.

         (a) If any condition on the obligations of Buyer as set forth in
     Section 9 above is not met as of the Closing Date, or in the event the
     Closing does not occur on or before the Closing Date, and in either case
     Buyer is not in breach of its obligations hereunder, this Agreement may, at
     the option of Buyer, be terminated as of the Closing Date, and Seller shall
     cause Escrow Agent to promptly remit or release the respective Initial and
     Additional Deposit including interest calculated on each deposit to Buyer.
     Upon such termination, the parties shall have no further obligations to one
     another hereunder (other than the obligations under Section 16 hereof and
     under Section 5(a) hereof, which will survive such termination).

         (b) If any condition to the obligations of Seller as set forth in
     Sections 10(a) or (b) is not met as of the Closing Date, or in the event
     the Closing does not occur due to a breach of Buyer's obligations
     hereunder, and in either case Seller is not in breach of its obligations
     hereunder, this Agreement may, at the option of Seller, be terminated, and
     Seller shall retain the Initial and Additional Deposit, including interest
     calculated in each Deposit as liquidated damages. Thereafter, the parties
     shall have no further obligations to one another hereunder (other than the
     obligations under Section 16 hereof and under Section 5(a) hereof, which
     will survive such termination).

         (c) If any condition to the obligations of Seller as set forth in
     Sections 10(c)or (d) above is not met as of the Closing Date, or in the
     event the Closing does not occur on or before the Closing Date, and in
     either case Seller is not in breach of its obligations hereunder, this
     Agreement may, at the option of Seller, be terminated, and Seller shall
     take all steps necessary to cause the Escrow Agent to promptly remit or
     release the respective Initial and Additional Deposit including interest
     calculated on each deposit to Buyer.

         (d) Upon the termination of this Agreement, whether pursuant to
     paragraph (a), (b), or (c) above, Seller shall be free to sell the Assets
     (or any portion thereof) to any other party without any limitation under or
     by reason of this Agreement, unless at such time a

                                       17

<PAGE>   19

     condition of Seller Default shall exist. Buyer shall cooperate with Seller
     in effectuating any such sale and shall promptly execute any instrument
     evidencing the termination of Buyer's right to acquire the Assets as may be
     reasonably requested by Seller. Buyer shall also immediately return to
     Seller all data and other information (and all copies thereof) furnished to
     Buyer by or on behalf of Seller in connection with this transaction.
     Thereafter, the parties shall have no further obligations to one another
     hereunder (other than the obligations under Section 16 hereof and under
     Section 5(a) hereof, which will survive such termination.

     12. THE CLOSING. The closing (herein called the "CLOSING") of the
transaction contemplated hereby shall take place in the offices of Seller, in
Dallas, Texas, on December 6, 1999, at 10:00 a.m. Central Time, or up to
fourteen (14) days later if requested by either Buyer or the Committee on behalf
of the Seller, or at such other date and time as the Buyer and Seller may
mutually agree upon, being herein called the "CLOSING DATE"). At the Closing:

         (a) Seller shall upon issuance of the 363(f) and 365 Orders (as defined
     in Section 17 hereinafter) authorizing the transaction:

             (i) execute, acknowledge and deliver to Buyer a conveyance of the
         Assets, (herein called the "CONVEYANCE"), in the form attached hereto
         as Exhibit C (and with Exhibit A and Exhibit B-l hereto being attached
         thereto), effective as to runs of oil and deliveries of gas as of 7
         o'clock a.m., Central Standard Time on November 1, 1999 (herein called
         the "EFFECTIVE DATE"); and

             (ii) execute and deliver to Buyer letters in lieu of transfer
         orders (or similar documentation), in form acceptable to both parties;
         and

             (iii) deliver to Buyer a release of the Mortgage and 363(f) Order
         insofar as it covers the Assets; and

             (iv) deliver to Buyer an affidavit or other certification that
         Seller is not a "foreign person" within the meaning of Section 1445 (or
         similar provisions) of the Internal Revenue Code of 1986 as amended;
         and

             (v) turn over possession of the Assets; and

             (vi) provide Buyer with Seller's Officer Certificate having the
         form and language of Exhibit D-l which is attached hereto and made a
         part hereof for all purposes. Such certificate shall certify that
         Seller has complied with and performed (or Buyer has waived) all
         provisions and conditions pertaining to Seller, to be performed prior
         to the Closing.

         (b) Buyer shall:

                                       18

<PAGE>   20

             (i) deliver to the Seller, (a) by wire transfer in immediately
         available funds to an account designated by Seller in a bank located in
         the United States, an amount equal to the Base Purchase Price (or, if
         applicable, the Subgroup Price) less the Initial Subgroup Deposit and
         the Additional Subgroup Deposit and interest calculated upon each
         deposit. In addition to and consistent with Section 363(k) of the
         Bankruptcy Code, Buyer shall be entitled to credit bid against the Base
         Purchase Bid the amount of its loan to Seller of $25,000,000 plus any
         accrued and unpaid interest; and

             (ii) deliver to Seller appropriate evidence reflecting change of
         operator as required by applicable authorities, and such evidence as
         Seller may require that Buyer is qualified with such authorities to
         succeed Seller as operator; and

             (iii) provide Seller with Buyer's Officer Certificate having the
         form and language of Exhibit D-2 which is attached hereto and made a
         part hereof for all purposes. Such Certificate shall certify that Buyer
         has complied with and performed (or Seller has waived) all provisions
         and conditions pertaining to Buyer, to be performed prior to the
         Closing.

             At the Closing, at Buyer's election, Seller and Buyer shall enter
         into a transition services agreement with respect to the Assets on
         terms and conditions mutually acceptable to the Parties. The transition
         services agreement shall provide, among other things, for (i) the
         operation of the Assets by Seller, and (ii) the payment by Buyer to
         Seller of fees and expenses customarily charged by firms providing such
         services. The Transition Services Agreement shall terminate one hundred
         twenty (120) days following the Closing Date, unless extended by the
         Parties or terminated by Buyer upon thirty (30) days prior written
         notice.

             Within ten (10) days after Closing, Seller will deliver to Buyer
         the original records and other materials described in Section 1(f)
         above. Sellers shall have the right to retain a copy of such records
         for use only in connection with the Case, at Seller's expense. With
         respect to each Oil and Gas Property with respect to which Seller is
         disbursing proceeds of production attributable to other patties
         entitled thereto, (i) Seller shall continue to collect proceeds of
         production during the month in which Closing occurs and shall be
         responsible for making disbursements, in accordance with its normal
         procedures (and at normal times), of such proceeds of production so
         collected to the parties entitled to same, with any proceeds of
         production thereafter collected by Seller to be promptly forwarded to
         Buyer (who shall thereafter account for same to the parties entitled
         thereto), (ii) Seller shall, as promptly as possible after Closing,
         deliver to Buyer (a) a copy of its "proceeds distribution list" for
         each such Asset (which proceeds distribution list shall include the
         name, address, social security number and applicable share of proceeds
         of production for each party to whom Seller is disbursing proceeds of
         production with

                                       19

<PAGE>   21

         respect to such Asset), (b) a list of all parties for whom it is
         holding in suspense proceeds of production, (c) a list of all parties
         for whom it is holding any advance payments made by other working
         interest owners for operations to be conducted on the Assets, and (d) a
         check (which shall be delivered within 30 days after the end of the
         month in which Closing occurs) in an amount equal to all suspended
         funds and advance payments. Following delivery of the materials
         referred to in clause (ii), Buyer shall become responsible for all
         disbursements of proceeds of production (including suspense and other
         disbursements attributable to periods prior to the Effective Date) and
         such disbursement activities shall be included in the matters which
         Buyer assumes, and indemnifies Seller with respect to, under Section 14
         below. It is understood and agreed that Seller does not represent or
         warrant to Buyer the accuracy of the "proceeds distribution lists" so
         delivered.

     13. CERTAIN POST-CLOSING ACCOUNTING ADJUSTMENTS.

         (a) Appropriate post-Closing adjustments shall be made between Buyer
     and Seller so that (i) all expenses which are incurred in the operation of
     the Assets before the Effective Date will be borne by Seller and all
     proceeds (net of applicable production, severance, and similar taxes) from
     sale of oil, gas and/or other minerals produced therefrom before the
     Effective Date will be received by Seller, and (ii) all expenses which are
     incurred in the ownership and/or operation of the Assets after the
     Effective Date will be borne by Buyer and all proceeds (net of applicable
     production, severance, and similar taxes) from the sale of oil, gas and/or
     other minerals produced therefrom after the Effective Date will be received
     by Buyer. It is agreed that, in making such adjustments: (i) oil which was
     produced from the Oil and Gas Properties and which was, on the Effective
     Date, stored in tanks located on the Oil and Gas Properties (or located
     elsewhere but used by Seller to store oil produced from the Oil and Gas
     Properties prior to delivery to oil purchasers) and above pipeline
     connections shall be deemed to have been produced before the Effective
     Date, (ii) ad valorem and similar such taxes assessed with respect to a
     period which the Effective Date splits, regardless of the basis on which
     such taxes are computed, shall be prorated based on the number of days in
     such period which fall on each side of the Effective Date (with the day on
     which the Effective Date falls being counted in the period after the
     Effective Date), and shall, where the current year's taxes are not yet
     known, be based on the previous year's taxes, and (iii) no consideration
     shall be given to the local, state or federal income tax liabilities of any
     party. In addition, there shall be a post-Closing accounting adjustment, to
     the extent necessary, to adjust the Base Purchase Price as provided in
     Sections 6 and 7 above, in the event that Title or Environmental Defects
     exceed the Defect Basket Amount or there is an NRI Increase in favor of the
     Seller in any Asset.

         (b) As soon as practicable after Closing, but in any event within sixty
     (60) days thereafter, Seller shall prepare and submit to Buyer, in
     accordance with this Agreement a proposed statement (herein called the
     "FINAL STATEMENT"), which shall show the final calculation of the Purchase
     Price, which may include good faith estimates or accruals for oil

                                       20

<PAGE>   22

     and gas receivables and all other post-Closing adjustments (herein called
     the "FINAL SETTLEMENT PRICE"). As soon as possible after receipt of the
     Final Statement, but in any event within fifteen (15) days after receipt
     thereof, Buyer shall deliver to Seller a written report containing the
     changes, if any, which Buyer proposes being made to the Final Statement. In
     the event no response is made by Buyer within such fifteen (15) day period,
     it shall be conclusively presumed that Buyer concurs with the Final
     Statement, and such Final Statement shall be the basis for the Final
     Settlement Price. In the event that Buyer submits a response, the parties
     shall exercise all reasonable efforts to agree with respect to the amounts
     due not later than sixty (60) days after the Closing, but in any event
     prior to March 1, 2000. After agreement upon a Final Settlement Price
     setting forth the amount by which the Purchase Price shall be adjusted
     (either upward or downward), the amount due shall be paid within five (5)
     business days thereafter by the party owing the same in immediately
     available funds.

     14. ASSUMPTION AND INDEMNIFICATION.

         (a) Buyer shall, on the date of Closing, assume within the meaning of
     Section 365 of the Bankruptcy Code and otherwise, and timely pay and
     perform, all duties, obligations, and liabilities relating to the Assets
     including, without limitation, Seller's ownership and operation of the
     Assets and the condition of the Assets, including all responsibilities and
     liabilities of Seller under the Related Contracts, whether arising on or
     after the Effective Date (including, without limitation, all obligations to
     properly plug and abandon, or replug and re-abandon, wells located on
     the Assets, to restore the surface of the Assets, and to comply with, or to
     bring the Assets into compliance with, Applicable Environmental Laws,
     including all liability and expense for any restoration, clean-up,
     disposal, or removal that may be incurred as a result of the existence or
     discovery of Hazardous Substances or other deleterious substances in, on,
     or under the Assets, regardless of when the events occurred that give rise
     to such condition).

         (b) Buyer shall, on the date of Closing, RELEASE, INDEMNIFY, and HOLD
     the Seller Group HARMLESS from and against any and all claims, actions,
     liabilities, losses, damages, costs, or expenses (including court costs and
     attorneys' fees) of any kind or character arising out of or otherwise
     relating to the Assets whether arising on or after the Effective Date.

         (c) THE ASSUMPTION AND INDEMNIFICATION SET FORTH IN SUBSECTIONS (a) AND
     (b) OF THIS SECTION SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS, OR
     LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES,
     DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING
     SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR
     PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS

                                       21

<PAGE>   23

     NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY,
     OR (ii) STRICT LIABILITY.

         (d) In order for Seller to seek indemnification under this Agreement,
     Seller shall give written notice to Buyer of the facts and circumstances
     giving rise to the claim. In that regard, if any suit, action, claim,
     liability or obligation (a "PROCEEDING") shall be brought or asserted by
     any third party which, if adversely determined, would entitle the Seller to
     indemnity under this Agreement, the Seller shall promptly notify the Buyer
     of the same in writing, specifying in detail the basis of such claim and
     the facts pertaining thereto. The Buyer, if it so elects, shall assume and
     control the defense of such Proceeding, including the employment of
     counsel reasonably satisfactory to the Seller and the payment of expenses.
     If the Buyer elects to assume and control the defense of a Proceeding, it
     will provide notice thereof within thirty (30) days after the Seller has
     given notice of the matter and the Seller shall have the right to employ
     counsel separate from counsel employed by the Buyer in any such action and
     to participate in the defense thereof, but the fees and expenses of such
     separate counsel employed by the Seller shall be at the sole cost and
     expense of the Seller.

     15. DISCLAIMER OF WARRANTIES. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF
SELLER CONTAINED IN SECTION 3 (EXCEPT FOR THE DUE DILIGENCE RIGHTS UNDER SECTION
6 HEREOF OR IN THE CONVEYANCE EXECUTED PURSUANT TO THIS AGREEMENT) ARE EXCLUSIVE
AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED,
STATUTORY, OR OTHERWISE, AND SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER
REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, THE ASSETS
SHALL BE CONVEYED PURSUANT HERETO WITH SPECIAL WARRANTY OF TITLE BY, THROUGH AND
UNDER SELLER, BUT NOT OTHERWISE, AND WITHOUT ANY OTHER WARRANTY OR
REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE RELATING TO
THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY
TO THE MODELS OR SAMPLES OF MATERIALS, OR MERCHANTABILITY OF ANY EQUIPMENT OR
ITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS PROVIDED OTHERWISE IN THE FIRST
SENTENCE OF THIS PARAGRAPH, WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY, OR
OTHER WARRANTY OR REPRESENTATION WHATSOEVER, BUYER SHALL HAVE INSPECTED, OR
WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT
THE ASSETS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED
TO, CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF
HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS OR OTHER MANMADE FIBERS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON, OR UNDER THE ASSETS.
BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE ASSETS, AND BUYER SHALL
ACCEPT ALL OF THE

                                       22

<PAGE>   24

SAME "AS IS, WHERE IS AND WITH ALL FAULTS." WITHOUT LIMITATION OF THE FOREGOING,
SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR
OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA REPORTS, RECORDS,
PROJECTIONS, INFORMATION, OR MATERIALS NOW HERETOFORE, OR HEREAFTER FURNISHED OR
MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION PRICING ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES
(IF ANY) ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR POTENTIAL OF THE ASSETS TO
PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE ASSETS OR ANY OTHER
MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER'S AGENTS
OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION, AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY SELLER OR
OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER ARE PROVIDED TO BUYER AS A
CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
SELLER, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER'S SOLE RISK TO
THE MAXIMUM EXTENT PERMITTED BY LAW.

     16. COMMISSIONS. Seller agrees to indemnify and hold harmless Buyer from
and against any and all claims, obligations, actions, liabilities, losses,
damages, costs or expenses (including court costs and attorneys fees) of any
kind or character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, Seller with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless Seller from and
against any and all claims, obligations, actions, liabilities, losses, damages,
costs or expenses (including court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of; Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.

     17. BANKRUPTCY COURT PROCESS.

     17.1 This Agreement is entered into by both parties with the express
understanding that it is subject to (i) approval by the Bankruptcy Court, (ii)
any other offers which may be timely submitted to the Bankruptcy Court, in
accordance with the bid procedures and (iii) the applicable provisions of the
Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

     17.2 As soon as practicable following the selection of Buyer and this
Agreement as a Winning Bid in accordance with the Bid Procedures, Seller shall
file with the Bankruptcy Court a motion ("363 MOTION") with supporting papers
(including a copy this Agreement). The 363 Motion shall seek approval of the
sale of the Oil and Gas Properties, and other Assets to Buyer free and clear of
any interest of an entity other than the Debtor's bankruptcy estate. Such 363
Motion, proposed findings of fact and conclusion of law, if any, and form of
order shall be in a form reasonably

                                       23

<PAGE>   25

satisfactory to Buyer and Buyer's counsel and the proposed findings of fact and
conclusion of law, if any, and form of order shall include the provisions and
relief described below as the 363 Order. Seller shall obtain a hearing on the
363 Motion as soon as practicable.

     17.3 As soon as practicable following the selection of Buyer and this
Agreement as a Winning Bid in accordance with the Bid Procedures, Seller shall
file with the Bankruptcy Court a motion (or otherwise seek the relief set forth
in this Section 17.3 in the 363 Motion) ("365 Motion") with supporting papers.
The 365 Motion shall seek (i) approval of the assumption by Seller and
assignment to Buyer of all Related Contracts, (except those Related Contracts
that Buyer designates herein that Buyer does not wish to have assumed and
assigned) ("Assigned Contracts"), (ii) a specific finding regarding Seller's
cure of any defaults under such Assigned Contracts at the time of Closing; and
(iii) the rejection by Seller of Related Contracts designated by Buyer and
agreed to by Seller (and the Creditors' Committee) as Related Contracts to be
rejected (or such executory contracts as may be rejected by Seller). Such 365
Motion, proposed findings of fact and conclusions of law, if any, and proposed
order shall be in form and substance reasonably satisfactory to the Buyer and
Buyer's counsel and such proposed findings of fact and conclusions of law, if
any, and form of order shall include the provisions and relief described below
as the 365 Order. Seller shall obtain a hearing on the 365 Motion as soon as
practicable. If additional Related Contracts are identified by Buyer or Seller
after the execution and delivery of this Agreement that are not described in
this Agreement and in the 365 Motion, then Seller will seek to obtain Bankruptcy
Court approval, at Buyer's election, of (a) the rejection by Seller (if agreed
to by Seller and the Creditors' Committee) of the applicable additional Related
Contracts designated by Buyer to be rejected, or, (b) the assumption by Seller
and assignment to Buyer of the applicable additional Related Contracts
designated by Buyer and agreed to by Seller (and the Creditors' Committee) to be
assumed and assigned to Buyer.

     17.4 Subject to the provisions of subsections 17.2 and 17.3 above, whether
the 363 Motion and 365 Motion are filed with the Bankruptcy Court and served as
one (1) motion or multiple motions is entirely within the discretion of the
Seller and the Creditors' Committee; provided, however, the 363 Motion and 365
Motion shall be served on all known creditors.

     17.5 "363 ORDER@ means an order, not susceptible to alteration or amendment
under Fed.R.Bankr.P.9023, of the Bankruptcy Court that (i) approves the 363
Motion, (ii) is in form and substance reasonably satisfactory to Buyer and
Buyer's counsel, (ill) approves the sale of the Oil and Gas Properties and other
Assets, to Buyer pursuant to the terms of this Agreement, the provisions of the
Bankruptcy Code and any other provisions ordered by the Bankruptcy Court. The
363 Order shall provide that the transfer of the Oil and Gas Properties from
Seller to Buyer shall be (i) free and clear of any interest in the Oil and Gas
Properties of an entity other than the estate, (ii) a legal, valid and effective
transfer of the Oil and Gas Properties, (iii) a transfer in exchange for
reasonably equivalent value and fair consideration under the Bankruptcy Code and
the laws of the United States, any State, territory, possession or the District
of Columbia and (iv) finds that the sale of the Assets to Buyer will maximize
the value of the Seller's estate and is in contemplation of the implementation
of a plan of reorganization and necessary to the confirmation and consummation
of any plan of reorganization. Accordingly, the sale of the Assets shall be
deemed a sale "under a plan confirmed"

                                       24

<PAGE>   26

within the meaning of Bankruptcy Code Section 1146(c) and shall be exempt from
any and all stamp taxes, recording taxes and similar taxes; provided, however,
that such exemption is contingent upon the Seller confirming a plan of
reorganization under Section 1129 of the Bankruptcy Code. Further, the 363 Order
shall provide that the transaction contemplated under this Agreement (i) was and
is undertaken by the Seller and Buyer in good faith, as the term is used in
section 363(m) of the Bankruptcy Code, and, (ii) does not and will not subject
Buyer to any pre-conveyance liability by reason of such Oil and Gas Properties
or Assets transfer under the Bankruptcy Code or the laws of the United States,
any State, territory, possession or the District of Columbia based, in whole or
in part, directly or indirectly, on any theory of law, including, without
limitation, any theory of successor or transferee liability unless provided in
or contemplated under the terms of this Agreement.

     17.6 "365 ORDER@ means an order of the Bankruptcy Court that (i) approves
the 365 Motion, (ii) is in form and substance reasonably satisfactory to Buyer
and Buyer's counsel, (iii) approves the assumption by Seller and assignment to
Buyer of the Oil and Gas Properties and the Related Contracts, (iv) contains a
specific finding regarding Seller's cure of any defaults under such Related
Contracts at the time of Closing, (v) approves the rejection by Seller of the
applicable Related Contracts. The 365 Order shall further provide that, if
additional Related Contracts arc identified by Buyer or Seller after the
execution and delivery of this Agreement that are not described in this
Agreement and in the 365 Motion, then if Seller agrees, then Buyer shall seek to
obtain Bankruptcy Court approval, at Buyer's election, of (a) the rejection by
Seller of the applicable additional Related Contracts designated by Buyer to be
rejected, or (b) the assumption by Seller and assignment to Buyer of the
applicable additional Related Contracts designated by Buyer to be assumed and
assigned.

     17.7 Whether the 363 Order and the 365 Order are submitted to the Court in
the form of one (1) order or two (2) orders is entirely within the discretion of
Seller and Creditors' Committee.

     17.8 On or before November 8, 1999, Seller shall deliver to the Buyer a
schedule ("Schedule of Assumed Contract Deficiencies"), which shall indicate as
to each Related Contract the amounts, if any, in Seller's understanding,
necessary or required under Section 365(b) of the Bankruptcy Code to remedy and
cure all monetary arrears under each of the Related Contracts ("Assumed Contract
Deficiencies") in order to effectuate the assumption and assignment of such
Related Contracts. Buyer shall have the right to obtain appropriate assurances
from the Seller or the Court that the Seller has paid, or made arrangements
reasonably acceptable to the Buyer to satisfy, all such Assumed Contract
Deficiencies. If the Seller disputes the amount necessary to cure a Related
Contract, the Seller will either establish an escrow fund and deposit the full
cure amount estimated by Seller or asserted by the non-debtor party to such
Related Contract into an escrow fund or if the Committee and Seller determine
the cure amount asserted by a party to a Related Contract is excessive, they may
decide to reject such contract under Section 365 of the Bankruptcy Code. Any
disputes in this regard will be resolved by the Bankruptcy Court. Buyer shall
pot be liable for any cure amounts under any of the Related Contracts. The
validity of the assumption, assignment and sale to Buyer of any Related Contract
shall not be affected by any dispute between the Seller and

                                       25

<PAGE>   27

another party to such Related Contract regarding the payment of the "cure"
amount under such Related Contract. Notwithstanding anything contained herein to
the contrary, the Seller shall be deemed to have assumed and assigned each
Related Contract as of the date of and only upon the Closing, and absent such
Closing, such Related Contract shall neither be deemed assumed nor assigned and
shall in all respects be subject to further administration under the Bankruptcy
Code.

     18. CASUALTY LOSS. In the event of damage by fire or other casualty to the
Assets prior to the Closing, then this Agreement shall remain in full force and
effect, and (unless Buyer and Seller shall otherwise agree) in such event

         (a) as to each such Asset so damaged which is an Oil and Gas Property,
     then, (i) if there is no policy of insurance in force with respect to such
     Asset, such Asset shall be treated as if it had a Title Defect associated
     with it and the procedure provided for in Section 6 shall be applicable
     thereto, or (ii) if Seller should be entitled to make any claim under any
     insurance policy with respect to such damage, Seller shall and/or pay over
     to Buyer, if assignable, or, if allowed under the applicable policy, such
     claims, and

         (b) as to each such Asset which is other than an Oil and Gas
     Properties, Seller shall assign to Buyer, if assignable, any and all
     insurance claims relating to such loss, and Buyer shall take title to the
     Asset affected by such loss without reduction of the Purchase Price.

         (c) At Buyer's election, Seller shall use its reasonable commercial
     efforts to assign its rights to and under its casualty and other insurance
     policies to Buyer to be effective as of the Closing Date (or thereafter at
     Buyer's election). In the event that a refund is due and payable by the
     insurance carrier as a result of the assignment by Seller to Buyer, Seller
     shall be entitled to receive such refund amount.

     19. NOTICES. All notices and other communications required under this
Agreement shall (unless otherwise specifically provided herein) be in writing
and be delivered personally, by recognized commercial courier or delivery
service (which provides a receipt), by telex or telecopier (with receipt
acknowledged), during normal business hours or by registered or certified mail
(postage prepaid), at the following addresses:

     If to Seller:     CIBC World Markets/CIBC Oppenheimer
                       1600 Smith St., Suite 3100
                       Houston, TX 77002
                       Attn: Billy Bauch
                       Fax: (713)650-7670
                       Phone: (713) 650-2550

     with a copy to:   Van Oliver
                       Andrews & Kurth L.L.P.
                       1717 Main St., Suite 3700
                       Dallas, Texas 75201
                       Fax: (214) 659-4401
                       Phone: (214) 659-4600

                                       26

<PAGE>   28

     and               Patrick J. Neigan, Jr.
                       Neligan & Averch, L.L.P.
                       Suite 4050, 1717 Main St.
                       Dallas, Texas 75201
                       Fax: (214) 745-2533
                       Phone: (214) 653-4393

     Buyer:            Arnos Corporation
                       767 Fifth Avenue
                       47th Floor
                       New York, NY
                       Attention: Robert Mitchell
                       Fax: (212) 750-5807

     with a copy to:   Berlack, Israels & Liberman LLP
                       120 West 45th Street
                       New York, NY 10036
                       Attention: Edward S. Weisfelner
                       Fax: (212) 704-0196

and shall be considered delivered on the date of receipt. Either Buyer or Seller
may specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other party, in
the manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address.

     20. SURVIVAL OF PROVISIONS. Except as expressly set forth in this Section
20, all of the representations, warranties, and covenants made by the Parties
shall terminate on the Closing Date. Notwithstanding the foregoing, the
representations, warranties, and covenants made by the Parties under Sections
2.1, 6 and 7 (to the extent the same are, by mutual agreement, not performed at
Closing), and Sections 8, 13, 14, 15, 16, 17, 18, 19 and 22 shall survive the
Closing and the delivery of the Conveyance.

     21. OPERATIONS. Subject to the terms and provisions of any existing
agreements covering the Assets, Seller agrees to turn over to Buyer, at Closing,
the operations of those Assets for which it is currently serving as operator.
Seller shall take all reasonable actions necessary to cause Buyer to become
operator as contemplated herein.

     22. MISCELLANEOUS MATTERS.

                                       27

<PAGE>   29

         (a) After the Closing, Seller and Buyer shall execute and deliver, and
     shall otherwise cause to be executed and delivered, from time to time,
     such further instruments, notices, division orders, transfer orders and
     other documents, and do such other and further acts as reasonably may be
     necessary to more fully and effectively grant, convey and assign the Assets
     to Buyer.

         (b) Except as provided in the following sentence, neither party shall
     have the right to assign its rights under this Agreement and any such
     assignment in violation of this provision shall be void.

         (c) No waiver of any provision of this Agreement shall be deemed or
     shall constitute a waiver of any provision of this Agreement (whether or
     not similar), nor shall such waiver constitute a continuing waiver unless
     otherwise expressly provided.

         (d) To the extent applicable to the transaction contemplated hereby, or
     any portion thereof, Buyer waives the provisions of the Texas Deceptive
     Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through
     17.63, inclusive (other than Section 17.555 which is not waived), Texas
     Business and Commerce Code. In connection with such waiver, Buyer hereby
     represents and warrants to Seller that Buyer (a) is in the business of
     seeking or acquiring, by purchase or lease, goods, or services, for
     commercial or business use, (b) has assets of Five Million and No/l00
     Dollars ($5,000,000.00) or more according to its most recent financial
     statement, (c) has knowledge and experience in financial and business
     matters that enable it to evaluate the merits and risks of the transaction
     contemplated hereby and (d) is not in a significantly disparate bargaining
     position.

         (e) In connection with Buyer's evaluation of the Assets, Seller shall
     disclose to Buyer certain confidential information, which is proprietary,
     and includes, but is not necessarily limited to, geological and geophysical
     data; maps, models, and interpretations; and commercial, contractual, and
     financial information. All such data disclosed by Seller to Buyer shall
     hereinafter be referred to as the "CONFIDENTIAL INFORMATION." Buyer has
     entered into with Seller that certain Confidentiality Agreement(s) dated
     October 20, 1999 regarding this Confidential Information. If, for any
     reason the Closing does not occur, Buyer agrees that the prior existing
     Confidentiality Agreement(s) will remain in effect as provided therein.

             (i)   Buyer may disclose the Confidential Information without
         Seller's prior written consent only to the extent such information:

                   (a) is already known to Buyer as of the date of disclosure
             hereunder;

                                       28

<PAGE>   30
                   (b) is already in possession of the public or becomes
             available to the public other than through the act or omission of
             Buyer;

                   (c) is required to be disclosed under applicable law or by a
             governmental order, decree, regulation, or rule (provided that
             Buyer shall give written notice to Seller prior to such
             disclosure); or

                   (d) is acquired independently from a third party that has the
             right to disseminate such information at the time it is acquired by
             Buyer.

             (ii)  Buyer may disclose the Confidential Information without
         Seller's prior written consent to an Affiliated Company (as hereinafter
         defined), provided that Buyer guarantees the adherence of such
         Affiliated Company to the terms of this Agreement. "AFFILIATED COMPANY"
         shall mean any company or legal entity that (a) controls either
         directly or indirectly a party, or (b) that is controlled directly or
         indirectly by such party, or (c) is directly or indirectly controlled
         by a company or entity that directly or indirectly controls such party.
         "CONTROL" means the right to exercise fifty percent (50%) or more of
         the voting rights in the appointment of the directors of such company.

             (iii) Buyer shall be entitled to disclose the Confidential
         Information without Seller's prior written consent to such of the
         following persons who have a clear need to know in order to evaluate
         Seller's petroleum exploration and production rights:

                   (a) employees, officers, and directors of Buyer;

                   (b) employees, officers, and directors of an Affiliated
             Company;

                   (c) any professional consultant or agent retained by Buyer
             for the purpose of evaluating the Confidential Information.

             (iv)  Prior to making any such disclosures to persons under
         subparagraph 21.e.(iii)(c) above, however, Buyer shall obtain an
         undertaking of confidentiality, in the same form and content as this
         Agreement, from each such person.

             (v)   Buyer and its Affiliated Companies, if any, shall use, or
         permit the use of the Confidential Information disclosed under Section
         22.(e)(ii) or 22.(e)(iii) above, only to evaluate petroleum exploration
         and production rights held by Seller.

             (vi)  Buyer shall be responsible for ensuring that all persons to
         whom the Confidential Information is disclosed under this Agreement
         shall keep such information confidential and shall not disclose or
         divulge the same to any

                                       29

<PAGE>   31

         unauthorized person. Neither party shall be liable in an action
         initiated by one against the other for special, indirect, or
         consequential damages resulting from or arising out of this Agreement,
         including, without limitation, loss of profit or business
         interruptions, however same may be caused.

             (vii) The Confidential Information shall remain the property of
         Seller, and Seller may demand the return thereof at any time upon
         giving written notice to Buyer. Within ten (10) days of receipt of such
         notice, Buyer shall return all of the original Confidential Information
         and shall destroy all copies and reproductions (both written and
         electronic) in its possession and in the possession of persons to whom
         it was disclosed pursuant to Sections 22.(e)(ii) and 22.(e)(iii)
         hereof.

             (viii) The term of this Section 22.(e) and the rights and
         obligations created hereunder shall commence upon the date hereof and
         shall continue for a period of two (2) years thereafter.

             (ix) Seller makes no representations or warranties, express or
         implied, as to the quality, accuracy, and completeness of the
         Confidential Information disclosed hereunder. Seller and its Affiliated
         Companies, and their officers, directors, employees, shall have no
         liability whatsoever with respect to the use of or reliance upon the
         Confidential Information by Buyer.

         (f) This Agreement and that certain Confidentiality Agreement dated
     October 20, 1999 between Seller and Buyer contain the entire understanding
     of the parties hereto with respect to the subject matter hereof and
     supersede all prior agreements, understandings, negotiations, and
     discussions among the parties with respect to such subject matter between
     Seller and Buyer. The headings contained in this Agreement are for
     convenience only and shall not control or affect the meaning or
     construction of any provision of this Agreement. Within this Agreement,
     words of any gender shall be held and construed to cover any other gender,
     and words in the singular shall be held and construed to cover the plural,
     unless the context otherwise requires. Time is of the essence in this
     Agreement.

         (g) This Agreement may be amended, modified, supplemented, restated, or
     discharged (and provisions hereof may be waived) only by an instrument
     in writing signed by the party against whom enforcement of the amendment,
     modification, supplement, restatement, or discharge (or waiver) is sought,
     or by order of the Court where the party against whom enforcement of any
     provision has been given notice and the opportunity to file objection.

         (h) Each party shall bear and pay all expenses it incurred in
     connection with the transaction contemplated by this Agreement.

                                       30

<PAGE>   32

         (i) This Agreement shall be binding on the parties hereto and their
     respective successors and assigns.

         (j) This Agreement shall not confer any rights or remedies upon any
     person other than Seller and Buyer and their respective successors and
     permitted assigns.

         (k) This Agreement may be executed in two or more counterparts, each of
     which shall be deemed an original, but all of which shall constitute one
     and the same instrument. It shall not be necessary for both parties to sign
     the same counterpart.

         (l) Buyer shall properly execute, acknowledge and file the Conveyance
     for record immediately upon receipt thereof and will furnish to Seller a
     copy of the recorded document promptly after Buyer's receipt of such
     recorded instrument from the clerk in the county or parish in which the
     Conveyance is recorded. In addition, where applicable, Buyer and Seller
     shall execute any forms required to effect a change of operator for all
     wells conveyed herein.

         (m) Prior to Closing, Buyer shall not issue any publicity or press
     release concerning this Agreement or the transaction contemplated hereby
     without the prior written consent of Seller, unless, in the written opinion
     of legal counsel acceptable to Seller, such disclosure is required by
     applicable law or other applicable rules or regulations of any governmental
     authority or stock exchange and such publicity or press release contains no
     more than the minimum information necessary to comply therewith. This
     provision shall not replace or restrict any provision in any prior
     agreement between the parties affecting confidentiality or the disclosure
     of information about the Assets.

         IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.

SELLER:                                BUYER:

NATIONAL ENERGY GROUP, INC.            ARNOS CORPORATION

By: /s/ BOB G. ALEXANDER               By: /s/ GEORGE W. HEBARD III
    -------------------------------        --------------------------------
Name: BOB G. ALEXANDER                 Name: George W. Hebard III
      -----------------------------          ------------------------------
Title: PRESIDENT & CEO                 Title: Vice President
       ----------------------------           -----------------------------

WITNESSES:                             WITNESSES:

/s/ GRACE BRICKER                      /s/ JENNIFER ALBRIGHT
-----------------------------------    ------------------------------------

/s/ TAMARA SIMS                        /s/ RUSSELL GLASS
-----------------------------------    ------------------------------------

                                       31

<PAGE>   33

                                ACKNOWLEDGMENTS

STATE OF TEXAS        )
                      )
COUNTY OF DALLAS      )

     This instrument was acknowledged before me, Notary Public, this 11TH day of
November, 1999, by BOB G. ALEXANDER, PRESIDENT & CEO of NATIONAL ENERGY, GROUP,
INC., a Delaware corporation, on behalf of the corporation.

     IN WITNESS, WHEREOF, I set my hand and official seal.

        [SEAL]                         /s/ MARILYN J. GRAHAM
                                       Notary Public

My commission expires:

8/31/02
----------------------

STATE NEW YORK           )
                         )
COUNTY OF NEW YORK       )

     This instrument was acknowledged before me, Notary Public, as of this 1st
day of November, 1999, by GEORGE HEBARD, Vice President of ARNOS CORPORATION, a
Nevada corporation, on behalf of the corporation.

     IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                 [SEAL]                /s/ VICKI A. GOLDSTEIN
                                       Notary Public

My commission expires:

                                       32

<PAGE>   34

                                    EXHIBITS

Exhibit A     -    Oil, Gas & Mineral Leases
                   Land Operating Contracts
                   Well Master List

Exhibit A-l   -    Order (I) Scheduling the Auction of the Aggregate Properties
                   and Subgroup Properties, and (II) Approving (A) the Bid
                   Procedures and Auction Guidelines and (B) the Notice
                   Procedure

Exhibit B     -    Gas Marketing Contracts
                   Production Department Contracts
                   Gas Balancing Balances -- 9/30/99
                   Preferential Right to Purchase
                   Contracts Subject to a Call on Production

Exhibit C     -    Conveyance

Exhibit D-l   -    Seller's Officers Certificate

Exhibit D-2   -    Buyer's Officers Certificate<PAGE>   1

                                                                  Exhibit 10.34

                                TCI, Music, Inc.
                             67 Irving Place North
                            New York, New York 10003

                                                                   May 18, 1999

AT&T Broadband & Internet Services, Inc.
9197 South Peoria Street
Englewood, Colorado 80112

Attention: Madison E. Bond

Dear Mr. Bond:

         As an inducement to AT&T Broadband & Internet Services ("AT&T
Broadband") to enter into, and conditioned upon the execution and delivery by
it of, a revised affiliation agreement (the "MTV Agreement") with MTV Networks,
a division of Viacom International, Inc. ("MTVN"), replacing the existing
affiliation agreement between Tele-Communications, Inc. and MTVN and providing
for the distribution of MTVN's services on the AT&T Broadband cable television
systems, and subject to MTVN and TCI Music, Inc. ("TCIM") entering into an
agreement (the "Music.co Agreement") to form a joint venture to be named
"Music.co" to engage in the online music and music-related businesses,
including e-commerce, TCIM will enter into an agreement with AT&T Broadband
having the following terms:

EXCESS AMOUNT PAYMENT:              Upon the occurrence of the Triggering
                                    Event, TCIM shall become obligated to pay
                                    to AT&T Broadband an amount (the "Excess
                                    Amount") equal to ten percent

<PAGE>   2

AT&T Broadband & Internet Services, Inc.
May 18, 1999

                                    (10%) of the Excess Value, but in no event
                                    less than $15 million nor more than $30
                                    million.

TRIGGERING EVENT:                   The Triggering Event will be the first to
                                    occur of (x) the closing of an initial
                                    public offering (the "IPO") of Music.co's
                                    common stock (the "Shares") or (y) the
                                    second anniversary of the closing of the
                                    TCIM's contribution of certain assets of
                                    SonicNet and The Box to Music.co (the
                                    "Closing"); provided, however, that in the
                                    event the IPO has not occurred on or before
                                    the second anniversary of the Closing, AT&T
                                    Broadband will be entitled, by written
                                    notice to TCIM, to extend the Triggering
                                    Event until the date of the first to occur
                                    of (i) an IPO of the Music.co Shares or
                                    (ii) the fifth anniversary of the Closing.

EXCESS VALUE:                       The "Excess Value" will be an amount equal
                                    to the excess of the Share Value over the
                                    Base Amount. The "Share Value" shall be the
                                    Average Market Price or the Private Share
                                    Valuation (as defined in the Music.co
                                    Agreement), as applicable, of TCIM's Equity
                                    Interest in Music.co. TCIM's Equity
                                    Interest shall be a number of shares or
                                    partnership interests of TCIM equal to the
                                    amount of its aggregate partnership
                                    interest in Music.co acquired at the
                                    closing (the "Closing") of the transactions
                                    contemplated by the Music.co Agreement
                                    (converted into the equivalent number of
                                    shares in the event Music.co is then a
                                    corporation), together with all additional
                                    partnership interests, shares or other
                                    equity interests issued to it as a result
                                    of its making any Additional Contribution
                                    (as defined in the Music.co Agreement) at
                                    or following the Closing. The Average
                                    Market Price of TCIM's Equity Interest
                                    shall be equal to the average of the
                                    closing market prices of a share of
                                    Music.co common stock for thirty (30)
                                    trading days selected by AT&T Broadband out
                                    of the sixty (60) consecutive trading days
                                    immediately following Music.co's IPO. The
                                    Private Share Valuation of the Equity
                                    Interest shall be equal to the per share
                                    value of

                                       2
<PAGE>   3

AT&T Broadband & Internet Services, Inc.
May 18, 1999

                                    TCIM's shares or other equity interests as
                                    determined in accordance with the Music.co
                                    Agreement (including in connection with
                                    TCIM's exercise of its put right);
                                    provided, however, that in the event that
                                    (A) AT&T Broadband has deferred the
                                    occurrence of the Triggering Event, (B) the
                                    IPO does not occur prior to the fifth
                                    anniversary of the Closing and (C) TCIM has
                                    not exercised its "put" right, then the
                                    Private Share Valuation shall be determined
                                    by TCIM and AT&T Broadband in accordance
                                    with and based upon the provisions relating
                                    to such determination contained in the
                                    Music.co Agreement. The "Base Amount" shall
                                    equal the sum of (x) the lesser of (i) $175
                                    million and (ii) the value of TCIM's Equity
                                    Interest as determined pursuant to the
                                    Music.co Agreement for purpose of
                                    determining whether Music.co must issue to
                                    TCIM additional shares upon the IPO or the
                                    second anniversary of the Closing
                                    (regardless of when the IPO occurs) and (y)
                                    the amount of all Additional Contributions
                                    made by TCIM in accordance with the Music.co
                                    Agreement.

CONSIDERATION:                      TCIM may, at its election, pay the Excess
                                    Amount in cash in immediately available
                                    funds or by issuing to AT&T Broadband newly
                                    issued shares of Series A Common Stock of
                                    TCIM (with such shares valued at the
                                    average market price thereof over the 30
                                    trading days prior to the occurrence of the
                                    Triggering Event). The Excess Amount will
                                    be payable upon the 30th day following the
                                    date the per share value of the Shares is
                                    established as provided above.

REGISTRATION RIGHTS:                If TCIM issues shares of its Series A
                                    common stock to AT&T Broadband, TCIM will
                                    enter into a registration rights agreement
                                    with AT&T Broadband having terms and
                                    conditions which are customary under the
                                    circumstances and reasonably acceptable to
                                    the parties. Such registration rights
                                    agreement will provide AT&T Broadband with
                                    a single demand registration right and

                                       3

<PAGE>   4

AT&T Broadband & Internet Services, Inc.
May 18, 1999

                                    customary piggyback registration rights (in
                                    each case at TCIM's cost, other than
                                    underwriting commissions, selling expenses
                                    and costs of counsel for AT&T Broadband, if
                                    any), and shall include customary
                                    underwriter cut-backs and restrictions.

AFFILIATION AGREEMENT:              AT&T Broadband will negotiate in good faith
                                    to enter into an agreement with TCIM or a
                                    joint venture between TCIM and Music.co
                                    (the applicable of the foregoing being the
                                    "Music Provider") for AT&T Broadband to
                                    provide and enable the functionalities
                                    necessary to provide to AT&T digital
                                    subscribers an interactive music and
                                    music-related transaction/commerce channel
                                    to be developed by the Music Provider.

                                       4

<PAGE>   5

T&T Broadband & Internet Services, Inc.
May 18, 1999

         If the foregoing accurately signifies your understanding of our
agreement, please so signify by signing the enclosed copy of this letter where
indicated and returning it to the undersigned.

                                       Very truly yours,

                                       TCI Music, Inc.

                                       By:  /s/ David B. Koff
                                          -------------------------------------
                                          David B. Koff
                                          Vice President &
                                          Assistant Secretary

Agreed to and Accepted:

By:    /s/ Madison Bond
   -----------------------------------
Name:  Madison Bond
Title: Executive Vice President

                                       5

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