American Real Estate Partners, L.P.
000 Xxxxx Xxxxxxx Xxxx
Xx. Kisco, NY 10549
July 8, 2005
Board of Directors
National Energy Group, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Gentlemen:
As you know, American Real Estate Partners, L.P., a Delaware limited
partnership ("AREP"), through its subsidiaries is the owner of 50.1% of the
issued and outstanding common stock of National Energy Group, Inc., a Delaware
corporation ("NEG").
By this letter, we are proposing that NEG and AREP enter into a
transaction pursuant to which the existing shareholders of NEG would receive
$3.00 in cash in respect of each NEG share which they now own and AREP or its
subsidiaries would own 100% of NEG.
Depending upon the ultimate structure, the transaction could be subject
to a vote of shareholders of NEG. Given its ownership of a majority of NEG's
outstanding shares, AREP would be in a position to approve the transaction. We
anticipate that the Board of Directors will form a special committee of
independent directors (the "Committee") to respond to our proposal. We request
the opportunity to present fully our proposal to the Committee and answer any
questions at the Committee's earliest convenience.
Obviously, neither NEG, on the one hand, nor AREP, on the other, will
have any legal obligation relating to the transaction until mutually
satisfactory definitive agreements have been executed by all parties, and there
can be no assurance as to the price or other terms at which any potential
transaction may be completed or that you or we will proceed with any
transaction.
We look forward to hearing from you and appreciate your consideration
of this important matter.
This letter does not constitute a binding offer or agreement between
us, as it is intended merely as an expression of our interest in discussing a
transaction. No agreement shall exist between us regarding the proposed
transaction prior to the execution of definitive documents agreeable to each of
us.
Very truly yours,
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors,
Inc., its general partner
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
