BAGHDAD, Iraq (AP) – An Iraqi farmer said Sunday that he saw seven heavily armed gunmen capture two American soldiers during an attack on a road checkpoint south of Baghdad, while U.S. troops searched for their comrades for a second day.

Another Iraqi said the Americans were offering $100,000 for information leading to the abductors, but the U.S. command denied that.

The White House promised to do everything it could to find the soldiers and said it had a message for anybody who may have taken the two men: “Give them back.”

The Defense Department identified the missing men as Pfc. Kristian Menchaca, 23, of Houston, and Pfc. Thomas L. Tucker, 25, of Madras, Ore. It said Spc. David J. Babineau, 25, Springfield, Mass., was killed in the attack. The three were assigned to the 1st Battalion, 502nd Infantry Regiment, 2nd Brigade, 101st Airborne Division (Air Assault), Fort Campbell, Ky.

Gunmen, meanwhile, kidnapped 10 bakery workers in Baghdad, and a mortar attack killed four people in the capital. Police also found 17 bodies around the city, including four women and a teenager handcuffed and shot in the head – apparently the latest victims of sectarian death squads.

While suffering the new blows to his effort to restore security in Baghdad, Iraqi Prime Minister Nouri al-Maliki pushed ahead with negotiations on a plan for reconciling the country’s ethnic and religious communities.

But his proposal, which would include a limited pardon for insurgents according to a draft obtained by The Associated Press, has been snarled by stark differences on that issue among the various groups, legislators said Sunday.

U.S. troops, backed by helicopters and warplanes, fanned out across the “Triangle of Death” south of Baghdad searching for the two missing servicemen, but the military offered no new information after saying Saturday that at least four raids had been carried out.

The predominantly Sunni region is the scene of frequent ambushes.

Ahmed Khalaf Falah, a farmer who said he witnessed the abduction of the Americans on Friday, said three Humvees were manning a U.S. checkpoint near Youssifiyah, when they came under fire.

Two Humvees chased after the assailants, but the third was attacked before it could move, he told AP. Seven masked gunmen, including one carrying what appeared to be a heavy machine gun, killed the driver of the third vehicle, then took the other two soldiers captive, Falah said.

Falah said tensions were high in the area as U.S. troops raided some houses and detained men in looking for the missing soldiers. He said the Americans were setting up checkpoints on all roads leading into the area of the attack and helicopters were hovering at low altitudes.

A Youssifiyah resident, who said his house was searched by U.S. soldiers Sunday afternoon, said the Americans were using translators to offer $100,000 for information leading to those who took the soldiers.

The U.S. military denied a reward had been offered. It said only that coalition and Iraqi forces were continuing the search and “will continue to use every resource available.”

The man in Youssifiyah said he would not cooperate.

“I will not do it even if they pay one million dollars,” he said, speaking on condition of anonymity because he feared retribution. “They deserve all that they are facing … we are living a hard life because of them.”

White House spokesman Tony Snow said he could not confirm the two missing soldiers were abducted, but he told “Fox News Sunday” that anybody who might be holding them should “give them back.”

“Obviously, there is a vigorous effort to try to locate them and to bring them back safely,” he said in an interview with CNN.

Iraqi Foreign Minister Hoshyar Zebari said the soldiers appeared to have been taken prisoner. “Hopefully they will be found and released as soon as possible,” he said on CNN’s “Late Edition.”

The U.S. military said Saturday that soldiers at a nearby checkpoint heard small-arms fire and explosions during the attack at 7:15 p.m. Friday, and a quick-reaction force reached the scene within 15 minutes. The force found Babineau dead but no signs of Menchaca and Tucker.

Maj. Gen. William Caldwell, spokesman for U.S. forces in Iraq, said blocking positions were established throughout the area within an hour of the attack to keep suspects from fleeing. He also said divers would search a Euphrates River canal near the attacked outpost.

The two soldiers were the first to go missing in the Iraq war since Sgt. Keith M. Maupin of Batavia, Ohio, was captured on April 9, 2004, when insurgents ambushed his fuel convoy west of Baghdad.

A week later, Al-Jazeera television aired a videotape showing the 20-year-old Maupin sitting on the floor surrounded by five masked men holding automatic rifles.

That June, Al-Jazeera aired another tape purporting to show a U.S. soldier being shot. But the dark, grainy tape showed only the back of the victim’s head and did not show the actual shooting. The Army ruled it was inconclusive whether the soldier was Maupin.

Elsewhere in Iraq, U.S. and Iraqi troops met little resistance as they established new outposts in southern Ramadi in an operation aimed at denying supplies to insurgents in Iraq’s biggest Sunni Arab city.

U.S. commanders said the move wasn’t the precursor to a rumored assault to drive out insurgents along the lines of the 2004 attack in Fallujah, but rather an “isolation” tactic.

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Associated Press writers Qassim Abdul-Zahra, Patrick Quinn, Sameer N. Yacoub, Sinan Salaheddin and Qais al-Bashir contributed to this report.

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