Document:

Filed by sedaredgar.com - Doral Energy Corp. - Exhibit 10.7

NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE 

          This
Net Profits Overriding Royalty Interest Conveyance (this “Conveyance”)
dated effective as of July 29, 2008, is from Doral Energy Corp., a Nevada
corporation, having its principal executive office and place of business at 111
N. Sepulveda Blvd., Suite 250, Manhattan Beach, California 90266-6821
(“Assignor”), to Macquarie Investments, LLC, a Delaware limited liability
company, whose address is 125 West 55th Street, 22nd
Floor, New York, New York 10019 (“Assignee”). 

W I T N E S S E T H: 

          FOR
AND IN CONSIDERATION OF THE SUM OF ONE HUNDRED DOLLARS ($100.00) and other good
and valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, Assignor by these presents does hereby GRANT, CONVEY,
ASSIGN and TRANSFER, without warranties or covenants of title, express, implied
or statutory, except as specifically set forth in the following paragraph, to
Assignee, and Assignee’s successors in title and assigns, the Net Profits
Overriding Royalty Interest (defined below) in and to the Subject Interests
(defined below). 

          TO
HAVE AND TO HOLD the Net Profits Overriding Royalty Interest, together with all
and singular the other rights, titles, interests, estates, remedies, powers,
privileges and appurtenances thereto, unto Assignee, its successors and assigns,
forever subject, however, to the terms and provisions of this Conveyance.
Assignor hereby grants for itself, its successors and assigns, to WARRANT and
FOREVER DEFEND all and singular the Net Profits Overriding Royalty Interest unto
Assignee, its successors and assigns, subject only to the Permitted
Encumbrances, against every Person whomsoever lawfully claiming or to claim the
same or any part thereof, by, through and under Assignor, but not further. The
Net Profits Overriding Royalty Interest is not a contingent interest but is a
fully and presently vested real property interest. 

ARTICLE I 
CERTAIN DEFINITIONS 

          Section
1.1      Specific Definitions. The following
terms, when used in this Conveyance, have the meanings indicated below (such
meanings to be fully applicable to both the singular and plural forms of the
terms defined): 

          “AFE”
means an authority for expenditure. 

          “Affiliates”
means for any Person (as hereinafter defined), any other Person who directly or
indirectly controls, is under common control with, or is controlled by such
Person. As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event (i) any Person who owns directly or indirectly ten percent (10%) or more
of the securities having ordinary 

voting power for the election of directors or other governing
body of a corporation or ten percent (10%) or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person, and
(ii) any subsidiary or partner of Assignor shall be deemed to be an Affiliate of
Assignor. 

          “Applicable
Percentage” means thirty-five percent (35%), provided,
however, upon receipt of the cumulative sum of FIVE MILLION Dollars
($5,000,000) in cash proceeds by Assignee or its successors and assigns
hereunder, the Applicable Percentages shall, effective as the first day of the
month following receipt of such sum, automatically decrease to twenty percent
(20%). 

          “Approved
Sales Contract” means an Existing Sales Contract or a Sales Contract
consented to in writing by Assignee. 

          “Assignee”
shall have the meaning set forth in the introductory paragraph of this
Conveyance, and shall include its successors and assigns. 

          “Assignor”
shall have the meaning set forth in the introductory paragraph of this
Conveyance and shall include its successors and assigns. 

          “Base
Rate” means that per annum interest rate announced from time to time by
Citibank, N.A. as its prime lending rate (or if unavailable, the then prevailing
comparable rate announced by JP Morgan Chase Bank, N.A.), plus two
percent (2%) per annum. 

          “Business
Day” means any day other than a day on which commercial banks are authorized
or required to close in New York, New York. 

          “Capital
Costs” means from and after the Commencement Date, on a cash accounting
basis, the aggregate costs incurred and paid for (a) renewals or extensions of
Leases, (b) any drilling, reworking, sidetracking, deepening, completing,
equipping, recompleting, stimulating or plugging back, or (c) constructing
production or gathering facilities which in each case pertain to the Subject
Interests and are authorized pursuant to an Operating Agreement or, if there is
no applicable Operating Agreement in effect, for which notice is given in
accordance with the provisions of Section 7.2; provided,
however, certain costs may be excluded from “Capital Costs” as provided
in Section 7.2. 

          “Code”
shall have the meaning assigned to such term in Section 10.5. 

          “Commencement
Date” means the earlier of (i) 12:01 a.m. local time on the Maturity Date or
(ii) 12:01 a.m. local time on the Loan Termination Date. 

          “Conversion
Agreement” means that certain Conversion Agreement dated effective as of
July 29, 2008 between Assignor and Assignee, as the same may be modified,
amended or restated from time to time. 

          “Conveyance”
means this Net Profits Overriding Royalty Interest Conveyance, as the same may
be amended, modified or restated from time to time. 

2 

          “COPAS”
means the accounting procedures which are a part of an applicable Operating
Agreement or, in the event that there is no Operating Agreement in effect, the
Accounting Procedure for Joint Operations recommended by the Council of
Petroleum Accountants Societies 1995 JOA, (onshore) then in effect with respect
to onshore or offshore operations, as applicable, for the location of the
Leases. 

          “Credit
Agreement” means that certain $50,000,000 First Lien Secured Credit
Agreement dated as of July 29, 2008, as the same may be modified, amended,
restated or rearranged from time to time, between Assignor, as Borrower, and
Macquarie Bank Limited, and its successors and assigns, as Administrative Agent,
and the Lenders party thereto from time to time. References to the Credit
Agreement in this Conveyance shall continue to be effective even if the Credit
Agreement has been terminated in which case references shall be to the Credit
Agreement in its form immediately prior to termination of same. 

          “Crude
Oil” means all crude, condensate and other liquid hydrocarbon substances.

          “Defensible
Title” means, with respect to the Subject Interests, such title that: (a)(i)
entitles Assignor to receive, free and clear of all royalties, overriding
royalties and net profits interests (except the Net Profits Overriding Royalty
Interest created hereby), or other burdens on or measured by production of
Hydrocarbons, not less than the Net Revenue Interests reflected in Exhibit
A for the productive life of the Subject Interests (subject only to the
Permitted Encumbrances), and (ii) obligates Assignor to bear costs and expenses
relating to the maintenance, development and operation of the Subject Interests
in an amount not greater than the Working Interests reflected in Exhibit
A for the productive life of the Subject Interests (subject only to the
Permitted Encumbrances), in such instance, free and clear of any Liens, other
than the Permitted Encumbrances, and any Liens in favor of Assignee and its
Affiliates or which are permitted hereunder, and (b) with respect to any royalty
and overriding royalty interests acquired by Assignor, net profits overriding
royalty interests and/or production interests and any rights Assignor acquires
to receive revenues from production that are not included in the Net Revenue
Interests and Working Interests set forth in clauses (a)(i) and (ii) above, good
and defensible title to such interests, free and clear of any Lien, other than
the Permitted Encumbrances, and any Liens and property interests which are in
favor of Assignee and its Affiliates or which are permitted hereunder. 

          “Dispose”
(including the correlative terms “disposed” or “disposition”) means any sale,
assignment, transfer, conveyance, gift, pledge, distribution, hypothecation or
other encumbrance or any other disposition, whether voluntary, involuntary or by
operation of law, and whether effected directly or indirectly. 

          “Effective
Date” means the date stated in Section 10.7. 

          “Existing
Sales Contract” means all Sales Contracts in effect on the Effective Date
and identified on Exhibit A hereto. 

          “Governmental
Authority” means the government of the United States of America, any other
nation, or any political subdivision thereof, whether state, local or tribal,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising 

3 

executive, legislative, judicial, taxing, regulatory or
administrative powers, jurisdiction or functions of or pertaining to government
over Assignor or Assignee. 

          “Gross
Proceeds” means, on a cash accounting basis, from and after the Commencement
Date, the aggregate gross amount received by Assignor, without duplication, from
or attributable to (a) the Sale of Subject Hydrocarbons produced from all
Subject Interests (including, without limitation, any amounts received by
Assignor with respect to overriding royalty interests, other non-Working
Interests or as the result of a Working Interest owner going non-consent under
an Operating Agreement which are part of the Subject Interests) and (b)
Manufacturing Proceeds, subject to the following: 

          (i)     
If Subject Hydrocarbons are sold pursuant to arm’s length sales contracts, the
Gross Proceeds of such Sale shall be the amount realized by Assignor from such
Sale; 

          (ii)      If
Subject Hydrocarbons are sold pursuant to an Approved Sales Contract, the Gross
Proceeds of such Sale shall be the amount realized by Assignor from such Sale;

          (iii)      If
Subject Hydrocarbons are sold to an Affiliate of Assignor that has not been
approved in writing by Assignee, the Gross Proceeds from such Sale shall be
deemed to be the higher of (A) the amount realized by Assignor from such Sale or
(B) the average of the three highest market prices based upon Sales at the
locations sales are made on the date of execution of this Conveyance received by
any unaffiliated party from the Sale of Hydrocarbons at the foregoing locations
during the period when the Subject Hydrocarbons are sold to an Affiliate of
Assignor; 

          (iv)     
If Subject Hydrocarbons are sold in any transaction other than those described
in clauses (i), (ii) and (iii) hereof, the Gross Proceeds of such Sale shall be
the Market Value of such Subject Hydrocarbons; 

          (v)     
Gross Proceeds shall include all consideration received, directly or indirectly
from Sales of Subject Hydrocarbons, including without limitation advance
payments, payments under take-or-pay (recoupable or non-coupable), production
payments or similar provisions of production Sales agreements but excluding the
effect of financially settled hedge transactions and any proceeds received by
Assignor for the use of Assignor’s facilities located on the Subject Interests
for the storage, transportation, processing or treating of Hydrocarbons on
behalf of a third party; and 

          (vi)      If
any proceeds are withheld from Assignor for any reason (other than at the
request of Assignor or due to the gross negligence of Assignor) such proceeds
shall not be considered to be Gross Proceeds until such proceeds are actually
received by Assignor; provided, however the Gross Proceeds shall
not include any interest, penalty or other amount that is not derived from the
Sale of Subject Hydrocarbons, but, instead, Assignor shall make payment directly
to Assignee of the Applicable Percentage of any such amounts paid to Assignor by
the purchaser of Subject Hydrocarbons. 

          “Hydrocarbons”
means all Crude Oil and Natural Gas. 

          “Invoiced
Costs” has the meaning assigned to such term in Section 3.3. 

4 

          “Lease
Use Hydrocarbons” means any Hydrocarbons which are unavoidably lost in the
production thereof or used by Assignor or the Operator on the Leases or any Unit
in which the Leases are pooled or unitized for drilling and production
(including, without limitation, use for secondary recovery) operations conducted
in the manner of a reasonably prudent operator and in good faith for the purpose
of producing Hydrocarbons from the Leases or from such Unit, but only for so
long as and to the extent such Hydrocarbons are so used. 

          “Leases”
means Crude Oil, Natural Gas and/or mineral leases or portions thereof listed
and described on Exhibit A attached hereto and made a part hereof by
reference, and the lands covered thereby and subject to the depth and acreage
limitations and reservations, if any, set forth in Exhibit A. 

          “Loan
Termination Date” means the date of repayment of all amounts outstanding
under any Promissory Note for any Advances. 

          “Manufacturing
Costs” shall mean the aggregate costs of Processing any Subject Hydrocarbons
that generate Manufacturing Proceeds. 

          “Manufacturing
Proceeds” shall mean the excess, if any, of (a) proceeds realized by
Assignor from the Sale of Subject Hydrocarbons, and any products thereof, that
have been Processed or are the result of any Processing over (b) the part of
such proceeds that represents the Market Value of such Subject Hydrocarbons
before any Processing. 

          “Market
Value” of any Subject Hydrocarbons shall mean: 

          (a)      With
respect to Crude Oil (including field liquids), (i) when sold pursuant to an
Approved Sales Contract, the price established therein, (ii) when sold other
than pursuant to an Approved Sales Contract the highest price available to
Assignor for such Crude Oil, at the lease level, on the date of delivery
pursuant to a bona fide offer, posted price or other generally available
marketing arrangement from or with a creditworthy non-Affiliated purchaser, or
(iii) if neither subsection (a)(i) nor subsection (a)(ii) is
applicable, the fair market value of such Crude Oil, on the date of delivery, at
the lease level, determined in accordance with other generally accepted and
usual industry practices; and 

          (b)     
With respect to any Natural Gas, (i) when sold pursuant to an Approved Sales
Contract, the price established therein, (ii) when sold other than pursuant to
an Approved Sales Contract the average of the three (3) highest prices (adjusted
for all material differences in quality) being paid at the time of production
for Natural Gas produced from the same field in Sales between creditworthy
non-Affiliated persons (or, if there are not three (3) such prices within such
field, within a fifty (50) mile radius of such field) but, for any Natural Gas
subject to price restrictions established, prescribed or otherwise imposed by
any Governmental Authority having jurisdiction over the sale of such Natural
Gas, no more than the highest price permitted for such category or type of
Natural Gas after all applicable adjustments (including without limitation tax
reimbursement, dehydration, compression and gathering allowance, inflation and
other permitted escalation), or (iii) if neither subsection (b)(i) nor
subsection (b)(ii) above is 

5 

applicable, the fair market value of
such Natural Gas, on the date of delivery, at the lease level, determined in
accordance with other generally accepted and usual industry practice. 

          “Maximum
Rate” means the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
by a creditor under applicable law. 

          “Month”
means that period of time beginning at 12:00 a.m. on the eleventh day of each
calendar month and ending at 11:59 p.m. on the tenth day of the next calendar
month. 

          “Monthly
Net Profit” means the Net Profit calculated on a Monthly basis for each
Month from and after the Commencement Date. 

          “Natural
Gas” means natural gas, casinghead gas and other hydrocarbon substances in
gaseous form, and including all products recovered in the processing of the
foregoing (other than condensate). 

          “Net
Marketing Proceeds” has the meaning assigned to such term in Section
3.3. 

          “Net
Proceeds” means the amount by which Gross Proceeds exceeds Production Costs.

          “Net
Profit” means the amount by which Net Proceeds exceed Capital Costs. To the
extent Net Profit is reduced below zero for any Month, the amount of such
reduction below zero shall be carried forward and utilized in the calculation of
Net Profit in subsequent Months until the negative balance is eliminated. 

          “Net
Profits Overriding Royalty Interest” means an overriding royalty interest in
the Subject Interests and the Subject Hydrocarbons in, under and that may be
produced and saved from the Subject Interests equal to the Applicable Percentage
of the Net Profit attributable to the Subject Interests from and after the
Commencement Date as calculated for each Month. 

          “Net
Revenue Interest” means the decimal or percentage share of Hydrocarbons
produced and saved from or allocable to the Subject Interests after deduction of
all lessor and overriding royalties and other burdens on or paid out of such
production (other than the Net Profits Overriding Royalty Interest created
hereby). 

          “NPI
Operating Statement” has the meaning assigned to such term in Section
8.3. 

          “NPI
Operating Statement Due Date” has the meaning set forth in Section
8.3. 

          “Operator”
means any party other than Assignor that may from time to time act as the
operator for one or more of the Subject Interests pursuant to an Operating
Agreement. 

          “Operating
Agreement” means any operating agreement in effect from time to time
affecting the Subject Interests between Assignor and other Working Interest
owners and agreements with any Operator related to the operation of the Subject
Interests, all as the same may be modified and amended from time to time;
provided, however, any operating agreement 

6 

which becomes effective after the Effective Date shall not be
effective and binding on Assignee unless and until either Lender or Assignee
consents to and approves of such operating agreement in writing, such approval
not to be unreasonably withheld; and provided further, with respect to the
Subject Interests described in Exhibit A, any operating agreement
described on Exhibit A that is contemplated in the farmout, development
or other agreement giving rise to Assignor’s right to earn interests shall be
effective and binding on Assignee. 

          “Permitted
Encumbrances” means (a) minor irregularities in title which do not (i)
materially interfere with the occupation, use and enjoyment by Assignor of any
of its Subject Interests, or (ii) materially impair the value thereof, (b) Liens
of landlords, vendors, carriers, warehousemen, mechanics, operators, laborers
and materialmen arising by law, and of Operators and non-operators arising by
contract under Operating Agreements, in the ordinary course of business for sums
not yet due or being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by GAAP
shall have been made therefor, (c) this Net Profits Overriding Royalty Interest,
(d) the specific exceptions, encumbrances and agreements described on Exhibit
A and affecting one or more of the Subject Interests INSOFAR ONLY as said
exceptions, encumbrances and agreements are valid and subsisting and are
enforceable against the particular Lease which is made subject to said
exceptions, encumbrances or agreements and (e) any agreement, including an
Operating Agreement, approved by Lender or Assignee. 

          “Person”
means an individual, corporation, partnership, limited liability company, joint
venture, trust or unincorporated organization, joint stock company or other
organization, government or any political subdivision thereof, a court, or any
other legal entity, whether acting in an individual, fiduciary or other
capacity. 

          “Processing”
means to manufacture, fractionate or refine Subject Hydrocarbons, but such term
does not mean or include (a) the use of standard lease, well or platform
equipment (such as dehydrators, Natural Gas treating facilities, separators,
heater treaters, lease compression facilities, injection or recycling equipment,
tank batteries, field gathering systems, pipelines and equipment) or (b) other
standard operations on any of the Subject Interests. 

          “Production
Costs” means from and after the Commencement Date, on a cash accounting
basis, the aggregate, without duplication, of Assignor’s proportionate share of
the following costs and expenses actually incurred and paid by Assignor with
respect to the Subject Interests from and after the Commencement Date: 

          (a)      all
lease operating expenses, including, without limitation, direct costs of
operating, producing, maintaining, abandoning and decommissioning the Subject
Interests as invoiced to and paid by Assignor or by the Operator calculated in
accordance with the COPAS; 

          (b)      all
direct costs of gathering, transporting, treating and marketing production from
the Subject Interests calculated in accordance with the COPAS; 

7 

          (c)      all
Taxes incurred by Assignor with respect to the ownership, development and
production of the Subject Interests and the Subject Hydrocarbons after the
Commencement Date (but excluding taxes based upon the income of Assignor); and

          (d)      all
Manufacturing Costs; 

provided, however, that “Production Costs” shall
not include any general and administrative expenses of Assignor and if at
the time in question, there is no Operating Agreement then in effect, Assignee
shall consent in writing , such consent not to be unreasonably withheld, to all
COPAS costs prior to inclusion of such costs in “Production Costs.”
Notwithstanding anything to the contrary set in this Conveyance, Production
Costs shall be reduced by the following: 

          (1)     
all proceeds received by Assignor from the Sale, from and after the Commencement
Date, of any materials, supplies, equipment and other personal property or
fixtures, or any part thereof or interest therein, located on or used in
connection with the Subject Interests; 

          (2)      all
insurance proceeds received by Assignor as a consequence of the loss or damage
from and after the Commencement Date to the Subject Interests, or any part
thereof or interest therein, or any materials, supplies, equipment or other
personal property or fixtures located on or used in connection with any of the
Subject Interests or any Subject Hydrocarbons unless such proceeds are used by
Assignor within one hundred eighty (180) days of receipt to replace any such
lost or damaged materials, supplies, equipment and other personal property; 

          (3)      the
proceeds of all judgments and claims received by Assignor (net of all reasonable
and necessary costs and expenses incurred by Assignor to receive such proceeds
of judgments and claims) for damages from and after the Commencement Date
directly or indirectly related to the Subject Interests or the Subject
Hydrocarbons, or any part thereof or interest therein, or any materials,
supplies, equipment or other personal property or fixtures, or any part thereof
or interest therein, located on or used in connection with any of the Subject
Interests or any Subject Hydrocarbons and which is specifically allocated to the
Subject Interests, the Subject Hydrocarbons or the materials, supplies,
equipment or other personal property or fixtures or any party thereof located on
or used in connection with any of the Subject Interests or any Subject
Hydrocarbons unless such proceeds are used or committed to be used by Assignor
within ninety (90) days of receipt to replace any such damaged materials,
supplies, equipment or other personal property or fixtures; 

          (4)      all
proceeds net of any reasonable and necessary costs and expenses incurred by
Assignor of and/or from each of the following amounts received by Assignor (to
the extent attributable to periods from and after the Commencement Date) with
respect to the Subject Interests (i) delay rentals, (ii) lease bonuses, (iii)
shut in Natural Gas well royalties or payments, (iv) rentals from reservoir use
or storage, (v) payments in connection with the drilling or deferring of any
Well on any of the Subject Interests and (vi) all other proceeds from whatever
source relating to the Subject Interests or the Subject Hydrocarbons and not
included in Gross Proceeds (including, without limitation, 

8 

fees for the use of any platform used
in the production of the Subject Hydrocarbons or for the processing or treating
of Hydrocarbons on behalf of a third party); and 

     (5)     
all credits received by Assignor from and after the Effective Date attributable
or related to Production Costs or Capital Costs incurred and paid from and after
the Commencement Date. 

To the extent that Production Costs are reduced below zero for
any Month, the amount of such reduction below zero shall be carried forward and
utilized in the calculation of Production Costs in subsequent Months until the
negative balance has been eliminated. 

          “Remaining
Net Profit” means, with respect to each Month, an amount equal to the Net
Profit for such Month minus the Net Profits Overriding Royalty Interest for such
Month. 

          “Sale”
means any sale, exchange, or other disposition for value. 

          “Sales
Contracts” means all contracts and agreements for the Sale of, or commitment
to sell, or right of first refusal to purchase Subject Hydrocarbons from the
Subject Interests. 

          “Subject
Hydrocarbons” means that portion of the Hydrocarbons that may be produced
from the Subject Interests and which are attributable to the Subject Interests
after deducting (i) all royalties, overriding royalties, production payments and
other burdens on or out of production from the Subject Interests to the extent
and only to the extent in effect on the Effective Date, but without any
deduction for the Net Profits Overriding Royalty Interest and (ii) any Lease Use
Hydrocarbons. 

          “Subject
Interests” means (a) all rights, title, claim or interest which Assignor has
on the Effective Date in each Lease, each Unit, and all leasehold, mineral and
other interests described in Exhibit A and any and all extensions,
renewals or replacements thereof in which Assignor now owns or hereafter
acquires an interest and the rights appurtenant to any of the foregoing, if any,
in and under any operating, unitization and pooling agreements and the Units
created thereby, and (b) all rights, title, claim or interest which Assignor has
on the Effective Date to share, pursuant to any Unit agreement or otherwise, in
the production of the Subject Hydrocarbons allocable or attributable to the
Leases, each Unit and all leasehold, mineral and other interests described in
Exhibit A, regardless of whether such right, title, claim or interest be
under or by virtue of a Lease, a sublease, an assignment, a unitization or
pooling agreement, a unitization or pooling order, a mineral deed, a royalty
deed, a mineral servitude deed, an Operating Agreement, a division order, a
transfer order or any other type of contract (including a farmout agreement or
development agreement), conveyance or instrument or under or by virtue of any
other type of claim of title, legal or equitable, recorded or unrecorded, even
though Assignor’s interests be incorrectly or incompletely described in, or a
description thereof be omitted from, Exhibit A. Except as set forth
hereinabove, Subject Interests (i) shall be enlarged by the discharge of any
payments out of production or by the removal of any charges or encumbrances to
which any of the same are subject, or any modification of any operating
agreement or Unit agreement, (ii) shall include any and all renewals and
extensions of any of the same, and all additional interests acquired by Assignor
in any Lease, Unit, minerals, notwithstanding the descriptions contained in
Exhibit A, (iii) shall reflect the economic benefit 

9 

realized by Assignor in connection with any “non-consent”
penalties other than the non-consent penalty provided for in Section
7.2(b) herein and (iv) shall reflect the economic detriment suffered by
Assignor in connection with any “non-consent” penalties imposed on Assignor or
its interest. 

          “Taxes”
means all ad valorem, property, occupation, gathering, windfall profit,
severance, gross production, energy, excise and other taxes and governmental
charges and assessments (except taxes on or measured by the income of Assignor
or Assignee) imposed on the Subject Interests, Subject Hydrocarbons or the Net
Profits Overriding Royalty Interest. 

          “Unit”
means a pooled unit or proration unit as designated by an effective designation
of unit, proration unit plan, or other instrument of similar impact properly
filed with the appropriate Governmental Authority. 

          “Working
Interest” shall mean the cost-bearing property interest (record title or
operating rights) which entitles the owner thereof to explore and develop
certain land for Hydrocarbon production purposes, whether under a Hydrocarbon
lease or unit, a compulsory pooling order or otherwise. 

          Section
1.2      Other Definitions. Other capitalized
terms used herein and not defined in Section 1.1 above or otherwise
defined in this Conveyance shall have the meaning ascribed to such term in the
Credit Agreement. 

          Section
1.3      Construction. The headings in this
Conveyance are for the convenience of reference only and shall not affect the
interpretation of this Conveyance. Whenever the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter, and the
number of all words shall include the singular and plural. The words “include,”
“includes” and “including” are deemed to be following by “without limitation.”
The words “hereby,” “herein,” “hereunder,” “hereinbefore,” “hereinafter” and
other equivalent words refer to this Conveyance in its entirety and not solely
the particular portion of the Conveyance in which such word is used. Unless
otherwise specified, references in this Conveyance to “Sections,” “Subsections”
or “Articles” refer to the sections, subsections or articles in this Conveyance.

ARTICLE II 
PAYMENT OF NET PROFITS OVERRIDING
ROYALTY INTEREST 

          Section
2.1      Payment. Beginning on the
twentieth (20th) day of the calendar month immediately following the
Commencement Date and on the same day of each calendar month thereafter
(provided, however, if such day is not a Business Day then payment
shall be made on the first Business Day prior to said date), Assignor shall pay
to Assignee the Net Profits Overriding Royalty Interest to Assignee with respect
to the immediately preceding Month (except for the first such payment which
shall include the period commencing with the Commencement Date through the end
of the aforementioned immediately preceding Month) as follows: 

10 

If by wire transfer: 

Bank of New York 
New York, NY 10004

ABA #021000018 
SWIFT: IRVTU53N 

Favour: 

Macquarie Bank Limited 
Sydney

A/C No. 8900055375 
CHIPSUID 236386 
Further Add: Macquarie Americas
Corp. 
Reference: Doral Energy Corp. 

If by check, checks should be made
payable to Macquarie Bank Limited and mailed to: 

Macquarie Bank 
PO Box 14107A

Newark NJ 07198-0107 
Reference: Doral Energy Corp. 

          The
directions for payments can be modified by written notice to Assignor pursuant
to Section 10.1. 

          Section
2.2      Interest on Past Due Payments. Any
amount not paid by Assignor to Assignee, within ten (10) days after the due
date, shall bear, and Assignor shall pay, interest in an amount equal to the
Base Rate in effect on such due date and such interest shall be paid from the
expiration of the ten (10) day grace period until such amount is paid;
provided, however, such interest shall not be in excess of the
Maximum Rate. No payment shall be considered to be past due if made within one
hundred twenty (120) days after the end of the calendar month of the first Sale
of production from a Well or Wells located on lands covered by the Subject
Interests. 

          Section
2.3      Overpayment. If at any time Assignor
inadvertently pays Assignee more than the amount due, Assignee shall not be
obligated to return any such overpayment, but the amount or amounts otherwise
payable for any subsequent period or periods shall be reduced by such
overpayment. 

          Section
2.4      Remaining Net Profits. Assignor shall
be entitled to retain each Month the amount of any Remaining Net Profit. 

ARTICLE III 
TITLE AND MARKETING OF HYDROCARBONS

          Section
3.1      Title. Assignor has and will
maintain Defensible Title to the Subject Interests until all or any part of the
Subject Interests expire in accordance with the Lease terms or 

11 

Assignor surrenders, abandons, sells or assigns all or any part
of the Subject Interests pursuant to the terms hereof. 

          Section
3.2      Marketing. Assignor shall have a
duty to market or cause to be marketed the Subject Hydrocarbons at the same
prices and on the same terms Assignor obtains for Hydrocarbons not subject to
this Conveyance which are of the same type and in the same location. Assignor
will bring the Subject Hydrocarbons to market with reasonable business judgment
and reasonable Crude Oil and Natural Gas field practices consistent with
industry practices. 

          Section
3.3      Taking Production In-Kind.
Assignee reserves the right, exercisable at Assignee’s sole risk and expense
after giving Assignor forty-five (45) days written notice, at any time and from
time to time as long as this Conveyance is in effect, to market, take in-kind or
have delivered to Assignee’s designated purchaser, the Applicable Percentage of
Hydrocarbons attributable to the Subject Interests and in which event, Assignee
shall have sole responsibility for any processing thereof at Assignee’s sole
cost and expense. If Assignee exercises the right to take in-kind, the following
shall be performed at Assignee’s cost and expense: (a) the Subject Hydrocarbons
taken in kind shall be delivered at a convenient point near the wellhead or the
connecting pipeline at which point it shall be metered, if necessary, through a
meter approved by Assignor; (b) any authority or permit required from any
Governmental Authority having jurisdiction shall be secured; (c) all necessary
reports to any such Governmental Authority shall be prepared and filed; and (d)
Assignee shall cause Assignee’s designated purchaser to pay directly (i) all
Taxes described in clause (c) of the definition of “Production Costs” and (ii)
all royalties owed to third parties, in each instance, to the extent those Taxes
or royalties are attributable to the Subject Hydrocarbons purchased and upon
payment of such Taxes or royalties, furnish evidence of such payment to
Assignor. If Assignee elects to exercise its right to take in-kind as provided
herein, Assignor will invoice Assignee for all Production Costs and, if
applicable, Capital Costs (collectively, the “Invoiced Costs”), that
would have otherwise been utilized to calculate Monthly Net Profit hereunder
and, within thirty (30) days after receipt of such invoice, Assignee shall remit
to Assignor the Applicable Percentage of such Invoiced Costs. Notwithstanding
anything to the contrary in this Section 3.3, under no circumstances will
Assignee ever have an obligation to remit to Assignor during any Month (pursuant
to an invoice delivered to Assignee by Assignor in accordance with the
immediately preceding sentence) Invoiced Costs in excess of an amount (the
“Net Marketing Proceeds”) equal to the aggregate proceeds received from
Assignee’s designated purchaser during that same Month less all amounts to be
paid directly by Assignee’s purchaser pursuant to this Section 3.3. To
the extent the Invoiced Costs for any Month exceed the Net Marketing Proceeds,
the amount of such excess will be carried forward and utilized in the
calculation of Invoiced Costs in subsequent Months until the negative balance is
eliminated. If the NPI has been partially assigned, each Person to whom the NPI
has been assigned must participate in the election to take the Subject
Hydrocarbons in kind or the election shall not be effective. 

ARTICLE IV 
OPERATION OF LEASED PREMISES 

          Section
4.1      Lease Covenants. Assignor agrees to use
commercially reasonable efforts where consistent with the standards of a
reasonable and prudent operator, if Assignor is the 

12 

operator, or if Assignor is not the operator, to use
commercially reasonable efforts to cause the Operator, to keep and perform all
of the material terms, conditions, and covenants of the Leases to be kept and
performed by the lessee thereunder and agrees to give Assignee the benefit of
each of said covenants, including, without limitation, protecting the Subject
Interests against drainage by reason of production from other properties.
Assignor shall have no obligations, either express or implied, by reason of this
Conveyance, to keep and maintain the Leases in force and effect either by the
payment of rentals, compensatory royalties or other payments or by the drilling
of any Wells upon the lands with respect to which the Net Profits Overriding
Royalty Interest in the Leases is herein assigned, it being expressly understood
that Assignee is to receive said Net Profits in such production only out of the
Subject Hydrocarbons, if, as and when produced and saved under the terms and
provisions of the Leases. Assignor shall have the right to obtain from the
lessors of the Leases or other parties or Governmental Authorities without
further consent of Assignee such modification agreements or time extensions as
Assignor may elect; provided, however, that no such modification
agreements or time extensions shall reduce the amount of the Net Profits
Overriding Royalty Interest or prejudice Assignee’s rights in any material
respect. Assignor further reserves the right, without the further consent or
joinder of Assignee, to unitize, pool or otherwise combine all or any portion of
the Leases and the lands covered thereby with any other lands or leases, on the
terms and conditions set forth in the Leases. 

          Section
4.2      Operations. Assignor agrees to conduct
and carry on, or use its commercially reasonable efforts to cause the Operator
to conduct and carry on, all operations respecting the Leases as a reasonably
prudent operator and in accordance with generally accepted engineering and
industry practices and to cause (or, with respect to Leases where Assignor is
not the operator, use commercially reasonable efforts to cause) every Well
within the lands covered by the Leases to be operated in a good and workmanlike
manner, and all improvements and equipment necessary or useful to the operation
of the same to be provided and all to be done that a reasonably prudent operator
would do, including cleaning out, reconditioning, plugging back or deepening
operations where necessary to the end that every Well within the lands covered
by the Leases shall be produced to maximize returns to Assignor and Assignee.
Nothing herein contained, however, shall obligate Assignor to continue to
operate any Well within the lands covered by the Leases when the Well ceases to
produce or, in the opinion of a reasonably prudent operator, is not capable of
producing Crude Oil, Natural Gas or other Hydrocarbons in paying quantities. For
purposes of the preceding sentence production “in paying quantities” with
respect to a Well shall mean production at such levels as to generate, on an
annual basis, total revenue net of landowners’ royalties, production payments,
net profits interests (but excluding the Net Profits Overriding Royalty Interest
conveyed hereby) and other burdens existing on the Effective Date, greater than
operating expenses for such Well. 

          Section
4.3      Surrender or Termination. Assignor
agrees that, without Assignee’s prior written consent, it will neither terminate
any of the Leases nor surrender or release any of the lands covered thereby
except (a) in connection with the abandonment of a Well in compliance with
Section 4.2 above, or (b) any undeveloped lands or any Lease covering
only undeveloped lands which may be surrendered, released or terminated so long
as no Affiliate of Assignor shall acquire an interest in such lands within one
(1) year after the lapse, release, termination or surrender thereof (whether
voluntarily or involuntarily), without prior written consent of Assignee. If
Assignee does not consent to Assignor’s proposal to terminate or release any of
the 

13 

Subject Interests, Assignor shall assign such Subject Interests
to Assignee and thereafter Assignee shall have sole responsibility for the
obligations related to such Subject Interests. Assignor shall give Assignee
written notice prior to the lapse, release, termination or surrender of any
Lease. If Assignor or any Affiliate of Assignor re-leases or re-lets any of the
lands covered by a lapsed, released, terminated or surrendered Lease within one
(1) year from the lapse, release, termination or surrender of the Lease, such
renewal or new lease shall become subject to the terms of this Conveyance.
Assignor shall, promptly upon the request of Assignee and at the sole cost of
Assignor, cause such Affiliate to execute such documents or take such other
actions as Assignee may reasonably request to evidence the conveyance to
Assignee of a Net Profits Overriding Royalty Interest in such new or renewed
lease. 

          Section
4.4      Assignor Discretion. Notwithstanding
anything herein to the contrary, Assignee will have no right to direct
operations on the Subject Interests. 

ARTICLE V 
UNITIZATION 

          Section
5.1      Pooled Subject Interests. To the extent
one or more of the Subject Interests have been pooled and unitized, such Subject
Interests are and shall be subject to the terms and provisions of such pooling
and unitization agreements, and the Net Profits Overriding Royalty Interests in
each such Subject Interest shall apply to and affect only the production from
such Units which accrues to such Subject Interest under and by virtue of the
applicable pooling and unitization agreements. 

          Section
5.2      Right to Pool. Assignor shall have the
right and power to pool and unitize any of the Subject Interests and to alter,
change or amend or terminate any pooling or unitization agreements heretofore or
hereafter entered into, as to all or any part of the land covered hereby, as to
any one or more of the formations or horizons hereunder, and as to any one or
more Subject Hydrocarbons, upon such terms and provisions as Assignor shall in
its sole and reasonable discretion determine. If and whenever through the
exercise of such right and power, or pursuant to any law hereafter enacted or
any rule, regulation or order of any Governmental Authority hereunder
promulgated, any of the Subject Interests are pooled or unitized in any manner,
the Net Profits Overriding Royalty Interest insofar as it affects such Subject
Interest shall also be pooled and unitized and in any such event such Net
Profits Overriding Royalty Interest in such Subject Interest shall apply to and
affect only the production which accrues to such Subject Interest under and by
virtue of the pooling and unitization. 

ARTICLE VI 
GOVERNMENT REGULATION AND TAXES

          Section
6.1      Government Regulations. All obligations
of Assignor hereunder shall be subject to all applicable laws of the federal
government and any other state or local government having jurisdiction, as well
as to the applicable rules, regulations and orders of any other Governmental
Authority having jurisdiction. 

          Section
6.2      Taxes. Assignor shall pay all Taxes
incurred with respect to the Subject Interests when due except to the extent
contested in good faith. In the event Assignor fails to pay 

14 

any Taxes which could result in the imposition of Liens and
encumbrances which could adversely effect the Net Profits Overriding Royalty
Interest conveyed herein, Assignee shall have the right to make the payment of
such Taxes on behalf of Assignor. To the extent Assignee pays any such Taxes on
behalf of Assignor, Assignor shall immediately reimburse Assignee for such
amounts upon demand. If Assignor does not reimburse Assignee for such amounts
prior to the next date on which Assignor is required to pay the Net Profits
Overriding Royalty Interest to Assignee pursuant to Section 2.1 above,
Assignor shall reduce the amount of Production Costs deducted in calculating Net
Proceeds for the applicable Month by an amount equal to (a) the amount of Taxes
paid by Assignee pursuant to this Section 6.2 multiplied by (b) an
amount equal to one minus the Applicable Percentage and plus (c)
any interest accruing (pursuant to Section 2.2 above) on the
amount of Taxes paid by Assignee since the date of demand. 

ARTICLE VII 
ASSIGNMENTS, CHANGE OF OWNERSHIP AND
CAPITAL COSTS 

          Section
7.1      Assignment. Assignor shall have the
right to assign, sell, transfer, convey, mortgage or pledge the Subject
Interests, or any part thereof, subject to the Net Profits Overriding Royalty
Interest and the terms and provisions of this Conveyance, without Assignee’s
prior approval; provided, however, that (a) any such assignment
during the term of the Credit Agreement must be in accordance with and subject
to the terms of the Credit Agreement and (b) if Assignor sells the Subject
Interests, Assignor must sell all of the Subject Interests and such sale must be
made to a single purchaser. Assignee has the right to assign the Net Profits
Overriding Royalty Interest in whole or in part; provided,
however, that (a) such assignment shall not cause the Assignor to make
multiple payments of the Net Profits Overriding Royalty Interests to more than
one Person, (b) if there are multiple Assignees, they must designate one
administrative agent to whom payments are made, notices are given and from whom
approvals are sought and (c) any partial sales shall be as to an undivided
interest in all of the Subject Interests. No change of ownership or right to
receive payment of the Net Profits Overriding Royalty Interest, or of any part
thereof, however accomplished, shall be binding upon Assignor until notice
thereof shall have been furnished by the Person claiming the benefit thereof,
and then only with respect to payments thereafter made. Notice of sale or
assignment shall consist of a copy of the recorded instrument accomplishing the
same; notice of change of ownership or right to receive payment accomplished in
any other manner (for example by reason of incapacity, death or dissolution)
shall consist of copies of recorded documents and complete proceedings legally
binding and conclusive of the rights of all parties. Until such notice shall
have been furnished to Assignor as provided above, the payment or tender of all
sums payable on the Net Profits Overriding Royalty Interest may be made in the
manner provided herein precisely as if no such change in interest or ownership
or right to receive payment had occurred. Upon request by Assignee, Assignor
shall, at the expense of Assignee, execute and deliver revised conveyances to
Assignee and to any Person to whom Assignee has assigned all or any portion of
this Net Profits Overriding Royalty Interest to reflect such assignment by
Assignee. All of the covenants and agreements of Assignor contained in this
Conveyance shall be deemed to be covenants running with the land and the Subject
Interests to the fullest extent permitted by applicable law and shall be binding
upon all successors in interest to, and all assigns of, Assignor and shall inure
to the benefit of all successors in interest to, and all assigns of, Assignee.
Likewise, all of the covenants and agreements of Assignee contained in this
Conveyance shall be deemed to be covenants running with the land and the Subject
Interests to the fullest extent permitted by 

15 

applicable law and shall be binding upon all successors in
interest to and all assigns of, Assignee and shall inure to the benefit of all
successors in interest to, and all assigns of, Assignor. All references herein
to either Assignor or Assignee shall include their respective successors and
assigns. An extract, memorandum or notice of this Conveyance may be filed in the
records of any county where the Subject Interests are located and with any
Governmental Authority deemed necessary by Assignor or Assignee. Neither party
shall make any assignment to any Person which would result in the forfeiture or
loss of any interest in the Leases under the laws of the United States of
America or any of the several States. 

          Section
7.2      Capital Costs. 

          (a)      From
and after the Commencement Date, Assignor shall submit in writing to Assignee
for review all AFEs related to costs and expenses which would comprise Capital
Costs and request that Assignee notify Assignor which (and, if so, to what
extent) costs and expenses detailed on such AFE will comprise Capital Costs for
the purpose of calculating Net Profit under this Conveyance; provided,
however, no such written submission is required for emergency operations
or to ensure compliance with Environmental Laws and Governmental Requirements
(both as defined in the Credit Agreement). In the event Assignor is the operator
of the Subject Interest for which the Capital Cost is to be incurred, Assignor
shall submit such AFEs to Assignee the earlier of (i) the date other interest
owners of the Subject Interests are notified of the proposed expenditure and
(ii) fifteen (15) business days prior to the proposed date of incurring such
expenditure. In the event Assignor is not the Operator of the Subject Interests
in which the proposed Capital Cost is to be incurred, Assignor shall notify
Assignee within forty-eight (48) hours after receipt of the AFE from the
Operator proposing the expenditure. Assignee shall have the lesser of (i)
fifteen (15) days after receipt of the proposed AFE from Assignor or (ii) one
(1) Business Day (as business days are determined in the relevant Operating
Agreement, or if not determined in an Operating Agreement, as business days are
defined in the Credit Agreement) less than the time permitted under the
applicable Operating Agreement (Assignor must specify in any notice to Assignee
the date and time by which Assignee is required to respond as determined by the
applicable Operating Agreement) to notify Assignor in writing whether it permits
the deduction of all or any portion of the Capital Costs included in the
submitted AFE in the calculation of Net Profit. Notwithstanding the foregoing,
if the AFE pertains to the drilling of a Well where a drilling rig is on
location, then notice may be given telephonically and Assignee shall have at
least forty-eight (48) hours (exclusive of Saturday, Sunday and legal holidays)
from the time of such notice to notify Assignor (which notice may also be
telephonic) whether it will permit the deduction of all or any portion of the
Capital Costs included in the submitted AFE in the calculation of Net Profit;
provided, however, if the subject Operating Agreement provides for
less than forty-eight (48) hours notice, then Assignor shall include in its
notice to Assignee a statement as to the notice period provided by the
applicable Operating Agreement and Assignee shall respond within such time
period as provided in the Operating Agreement. Should Assignee fail to respond
within the applicable time period, then Assignee shall be deemed to have
disallowed the deduction of any such Capital Costs in the calculation of Net
Profit. Assignor shall be entitled to rely upon any notice delivered to Assignor
by a person authorized to deliver 

16 

notices on behalf of Assignee, and
shall not be required to poll all persons authorized to receive notices on
behalf of Assignee. 

          (b)      To
the extent Assignee does not permit (either through a notice in writing or a
deemed disallowance) the deduction of any Capital Costs included in any AFE
submitted by Assignor in the calculation of Net Profit, Assignor shall be
entitled to receive additional proceeds from the Subject Interest(s) and only
from the Subject Interest(s) (if any) for which such disallowed item or items
pertain in an amount equal to two hundred percent (200%) of the value of the
costs and expenses for which Assignee has not permitted the deduction in the
calculation of Net Profit. Assignor shall provide Assignee a reconciliation
statement each month with the monthly statements provided in accordance with
Section 8.2 showing the payoff status of the non-permitted deduction item
or items for each applicable Subject Interest. 

          (c)      In
the event Assignee has, in accordance with Section 7.2(b), refused to
permit the deduction of any Capital Costs in the calculation of Net Profit, (i)
the proceeds attributable to the affected Subject Interest(s) shall be excluded
from the calculation of Gross Proceeds during the period from the date of
Assignor’s initial expenditure of the costs in question until Assignor has
recovered the additional proceeds described in Section 7.2(b), and (ii)
the Production Costs otherwise attributable to such affected Subject Interests
shall be excluded from the calculation of the Production Costs during such
period of time. 

          Section
7.3      Conversion Agreement. This Net
Profits Overriding Royalty Interest Conveyance is subject in all respects to the
rights of Assignor and Assignee pursuant to the Conversion Agreement. 

ARTICLE VIII 
RECORDS AND REPORTS 

          Section
8.1      Books and Records. Assignor shall at
all times maintain true and correct books and records sufficient to determine
the amounts payable to Assignee hereunder including, but not limited to, a Net
Profits Overriding Royalty Interest account which will record all Gross
Proceeds, Production Costs and Capital Costs from which the Net Profits
attributable to the Net Profits Overriding Royalty Interest is calculated. 

          Section
8.2      Inspections; Exception to
Payments. Subject to the time limitations set forth in Section 8.4,
the books and records referred to in Section 8.1 shall be open for
inspection by Assignee or its duly authorized representative at the office of
Assignor during normal business hours. Assignor will permit any one or more
representatives designated by Assignee to make such inspections of the Subject
Interests at any reasonable time as such representatives deem proper, at the
sole risk and expense of Assignee, and, if the Subject Interests are operated by
a Operator, Assignor shall utilize its commercially reasonable efforts to permit
such access by Assignee’s representatives, and, in either case, subject to any
safety or other requirements which are imposed by Assignor as operator or the
Operator, if Assignor is not the operator, and will furnish to Assignee, if and
whenever requested, such detailed information as Assignee may reasonably request
concerning the Subject Interests, the operation thereof, the Subject 

17 

Hydrocarbons and the determination of the Net Profits
Overriding Royalty Interest hereunder, but subject to any confidentiality
restrictions which may then be in effect with respect to any such detailed
information. The acceptance by Assignee of any payment hereunder shall not
preclude Assignee from taking exception to the correctness of the amount
thereof; provided, however, that any such exception must be
specified by Assignee and a notice given to Assignor. 

          Section
8.3      Monthly NPI Operating Statement.
Commencing on the 15th day of the calendar month following the
Commencement Date, and on the 15th day of each succeeding calendar
month (the “NPI Operating Statement Due Date”), Assignor shall deliver to
Assignee an operating statement in substantially the form of Exhibit B
(“NPI Operating Statement”), which NPI Operating Statement, with respect
to the Month ending immediately prior to the NPI Operating Statement Due Date,
shall show the detailed and itemized computation of the Monthly Net Profit and
Net Profits Overriding Royalty Interest due Assignee under Section 2.1 of
this Conveyance. Each NPI Operating Statement, with respect to the Month ending
immediately prior to the applicable NPI Operating Statement Due Date, shall
include and contain, in addition to the foregoing, (a) the Gross Proceeds, (b)
the Production Costs paid, payable and/or processed for payment or
reimbursement, (c) the Capital Costs paid, payable and/or processed for payment
or reimbursement, (d) other such Gross Proceeds, Production Cost and Capital
Cost verification as may be required by Exhibit B, and (e) the Remaining
Net Profit. 

          Section
8.4      Assignee’s Exceptions to Monthly
Statements. If Assignee shall take exception to any item or items included
in any NPI Operating Statement rendered by Assignor, Assignee shall notify
Assignor in writing within twelve (12) calendar months after the receipt of such
statement, setting forth in such notice the specific charges complained of and
to which exception is taken or the specific credits which should have been made
and allowed, and with respect to such complaints and exceptions as are
justified, an adjustment shall be made. After the expiration of such twelve (12)
calendar month period after Assignee’s receipt of any NPI Operating Statement,
Assignee shall not be entitled to receive, and Assignor shall not be obligated
to pay, any amounts with respect to the Net Profits Overriding Royalty Interest
otherwise payable to Assignee for the Month covered by such NPI Operating
Statement. 

          Section
8.5      Geological and Engineering Data.
Subject to any applicable contractual limitations of confidentiality or other
contractual restrictions with co-owners or other third parties, upon request by
Assignee, Assignor shall furnish to Assignee, at Assignee’s expense, copies of
and/or access to all seismic data, engineering reserve reports, electric and
other logs of the Leases and other geologic and geophysical data owned by or
under the control of Assignor, and Assignee shall also have access to all cores,
cuttings, and other geological, geophysical well and production data and maps
secured from, or prepared in connection with, operations on the Leases owned by
or under the control of Assignor. Assignee shall also have the right to receive,
within a reasonable period not to exceed thirty (30) days after Assignee’s
request, quarterly reports showing the status of development, production, and
other operations conducted on the Leases during the preceding quarter and the
preceding twelve calendar months. Assignor makes no representations regarding
the reliability or accuracy of any data provided to Assignee hereunder and shall
not be liable for the use of such information by Assignee or any third party.

          Section
8.6      Confidentiality. All information
furnished to Assignee pursuant to this Conveyance shall be confidential and for
the sole benefit of Assignee and its Affiliates, lenders 

18 

and assigns and shall not be disclosed by Assignee to other
Persons except its Affiliates, consultants, lenders, partners and prospective
purchasers of interests in the Net Profits Overriding Royalty Interest and
representatives and consultants retained to advise Assignee who agree to hold
such information as confidential, and except Governmental Authorities governing
Assignee to whom Assignee is obligated to disclose such information. 

ARTICLE IX 
NON-LIABILITY OF ASSIGNEE 

          Except
as provided in Section 3.3, in no event shall this Conveyance create or
be deemed to create any liability or responsibility on the part of Assignee for
any costs or liabilities incurred by Assignor or any other lessee attributable
to the Subject Interests or the Subject Hydrocarbons nor shall Assignee be
required to pay to Assignor any sums previously paid by Assignor to Assignee,
pursuant to this Conveyance. Subject to the provisions hereof, Assignor hereby
agrees to indemnify and hold Assignee harmless from and against any costs or
liabilities incurred relating to the Subject Interest or the Subject
Hydrocarbons. ASSIGNOR HEREBY AGREES TO INDEMNIFY AND HOLD ASSIGNEE HARMLESS
FROM AND AGAINST ANY COSTS OR LIABILITIES INCURRED RELATING TO THE SUBJECT
INTERESTS OR THE SUBJECT HYDROCARBONS EXCEPT FOR ANY COSTS AND LIABILITIES
ARISING OUT OF ASSIGNEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT;
PROVIDED, HOWEVER, THAT THE INDEMNIFICATION HEREBY GRANTED BY
ASSIGNOR SHALL NOT BE ASSIGNABLE BY ASSIGNEE AND SHALL NOT BE BINDING UPON
ASSIGNOR AS TO ANY PERSONS TO WHOM ASSIGNEE ASSIGNS ALL OR ANY PORTION OF THE
NET PROFITS OVERRIDING ROYALTY INTEREST. 

ARTICLE X 
MISCELLANEOUS 

     Section 10.1 Notices. Any
notice, demand or document which either party is required or may desire to give
hereunder shall be in writing and given by messenger, nationally recognized
courier, facsimile or other electronic transmission, or United States registered
or certified mail, postage prepaid, return receipt requested, addressed to such
party at its address and facsimile number shown below, or at such other address
as either party shall have furnished to the other by notice given in accordance
with this provision. 

If to Assignee: 

Macquarie Investments, LLC. 
125
West 55th Street, 22nd Floor 
New York, New York 10019

Attention:           Anthony
Lennon

Telephone:          (212)
548-2646

Facsimile:             (212)
399-8929

E-Mail:                 
anthony.lennon@macquarie.com

19 

with copies to: 

Macquarie Bank Limited 
Houston
Representative Office 
One Allen Center 
500 Dallas Street, Suite 3100

Houston, Texas 77002

Attention:           Michael
Sextro 
Telephone:         
(713) 275-6207

Facsimile:             (713)
275-6222

E-Mail:                 
michael.sextro@macquarie.com

and 

Macquarie Bank Limited 
Executive
Director-Metals and Energy Capital 
Level 15, No. 1 Martin Place 
Sydney

New South Wales 2000 
Australia

Attention:           Executive
Director

Telephone:          +61 2
8232 3333

Facsimile:            
+61 2 8232 3590

Email:                   
katie.choi@macquarie.com

If to Assignor, to: 

Doral Energy Corp. 
111 N.
Sepulveda Blvd., Suite 250 
Manhattan Beach, CA 90266-6821

Attention:           Mr.
Paul Kirkitelos

Telephone:         
310-990-8708

Facsimile:            
253-541-7833

E-Mail:                 
paulk@doralenergy.com 

and to 

Doral Energy Corp. 
3000 N.
Garfield, Suite 210 
Midland, Texas 79705

Attention:                Pat
Seale

Telephone:             
713-899-1712

Fax:                          
432-505-9746

E-Mail:                     
pats@doralenergy.com 

          Any
notice delivered or made by messenger, facsimile, or United States mail shall be
deemed to be given on the earliest date of actual delivery as shown by messenger
receipt, the 

20 

addressor’s facsimile machine confirmation or other verifiable
electronic receipt, or the registry or certification receipt. Assignee need not
delay action on notice transmitted orally by an authorized officer of Assignor
to Assignee until receipt of written confirmation of such notice. 

          Section
10.2      Term. This Conveyance shall remain in
force so long as any of the Subject Interests, or any portion thereof, are in
effect. 

          Section
10.3      Further Assurances. Should any
additional instruments of assignment and conveyance be required to describe more
specifically any interests subject hereto, Assignor agrees to promptly execute
and deliver the same upon the written request of Assignee. If any other or
additional instruments are required in connection with the transfer of state or
federal lease interests in order to comply with applicable law or regulations,
Assignor further agrees to promptly execute and deliver the same upon the
request of Assignee. 

          Section
10.4      Substitution of Warranty. This
instrument is made by Assignor with full substitution and subrogation of
Assignee in and to all rights and actions of warranty which Assignor has or may
have against any and all Persons, and in and to all covenants of warranty by any
and all Persons heretofore given or made with respect to the Subject Interests
or any part thereof or interest therein, to the extent of the interests granted
to Assignee herein. 

          Section
10.5      Intention of the Parties. Nothing
herein contained shall be construed to constitute either party hereto (under
state law or for tax purposes) the agent of, or in partnership with, the other
party. If, however, the parties hereto are deemed to constitute a partnership
for federal income tax purposes, the parties elect to be excluded from the
application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code
of 1986, as amended (the “Code”), and agree not to take any position
inconsistent with such election. Upon the request of either party, the parties
shall execute such evidence of such election as may be required by the Secretary
of the Treasury of the United States or the Internal Revenue Service, including,
without limitation, all of the returns, statements and data required by Treasury
Regulations §1.761, or any successor regulation thereto. If any present or
future income tax laws of the state or states which may require such filing or
any future income tax laws of the United States contain provisions similar to
those in Subchapter K, Chapter 1, Subtitle A of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted, each
party shall make such election as may be permitted or required by such laws. In
addition, the parties hereto intend that the Net Profits Overriding Royalty
Interest conveyed hereby by Assignor to Assignee shall at all times be treated
as an “economic interest” in the Subject Hydrocarbons within the meaning of the
Code (or any corresponding provisions of succeeding law) provided that neither
party represents or warrants to the other party the tax effect of this
Conveyance. 

          Section
10.6      Binding Effect. This Conveyance shall
bind and inure to the benefit of the successors and assigns of Assignor and
Assignee. 

          Section
10.7      Effective Date. This Conveyance shall
be effective as of 7:00 a.m. local time on the date first set forth in this
Conveyance where each of the Subject Interests are located notwithstanding the
Commencement Date (the “Effective Date”). 

21 

          Section
10.8      Unenforceable or Inapplicable
Provisions. If any provision hereof is invalid or unenforceable in any
jurisdiction, the other provisions hereof shall remain in full force and effect
in such jurisdiction, and the remaining provisions hereof shall be liberally
construed in favor of Assignee in order to effectuate the provisions hereof, and
the invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the Subject Interests is situated shall be deemed inapplicable to, and not used
in, the interpretation hereof. 

          Section
10.9      Affidavit. Assignor hereby
authorizes Assignee to prepare and file in the appropriate records where each of
the Leases is located an affidavit prepared by Assignee which sets forth the
Commencement Date and the Applicable Percentage. 

          Section
10.10      Rule Against Perpetuities Savings
Clause. It is not the intent of the parties that any provision herein
violate any applicable law regarding the rule against perpetuities, the
suspension of the absolute power of alienation or other rules regarding the
vesting or duration of estates, and this Conveyance shall be construed as not
violating such rule to the extent the same can be so construed consistent with
the intent of the parties. If, however, any provision hereof is determined to
violate such rule, then such provision shall nevertheless be effective for the
maximum period (but not longer than the maximum period) permitted by such rule
that will result in no violation. Any future interests created or contemplated
by this Conveyance which are determined to be subject to the Rule Against
Perpetuities shall, if they have not theretofore vested, be extinguished
whenever twenty one years less one day shall have elapsed after the death of the
survivor of Queen Elizabeth II of the House of Windsor, England, and Philip
Mountbatten, Prince Philip, Duke of Edinburgh, and their children and
grandchildren who are living at the date of the execution of this Conveyance.

          Section
10.11      Counterpart Execution. This
Conveyance may be executed in several original counterparts. Each counterpart
shall be deemed to be an original for all purposes, and all counterparts shall
together constitute but one and the same instrument; provided,
however, in making proof of this Conveyance, it shall only be necessary
to produce one counterpart hereof, executed by the parties hereto, and it shall
not be necessary to produce nor to account for any other counterpart. To the
extent permitted under the laws of any jurisdiction where this Conveyance is to
be filed, there may be attached to the counterpart of this Conveyance to be
filed in such jurisdiction an Exhibit A which shall contain only the
legal description of the Subject Interests encumbered by this Conveyance in such
jurisdiction and in all cases this Conveyance may be filed without attaching
Exhibit B. 

          Section
10.12      Governing Law. THIS CONVEYANCE SHALL
BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW MEXICO EXCEPT TO
THE EXTENT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE. 

          Section
10.13      WAIVER OF JURY TRIAL. TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, EACH OF THE UNDERSIGNED HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT WHICH IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY 

22 

AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
CONVEYANCE. 

[Signatures appear on the following page(s)] 

23 

          IN
WITNESS WHEREOF, each of Assignor and Assignee has caused this Conveyance to be
executed in its name and behalf by its proper signatory officers thereunto duly
authorized, in multiple originals, effective as of the date first set forth in
this Conveyance. 

ASSIGNOR: 

DORAL ENERGY
CORP., 
a Nevada corporation 

	 	By: 	/s/ Paul Kirkitelos 
	 	  	       
                 Paul Kirkitelos 
	 	  	       
                 President & CEO

ACKNOWLEDGMENT 

	STATE OF CALIFORNIA 	§ 
	  	§ 
	COUNTY OF Los Angeles 	§ 

          This
instrument was acknowledged before me on this 29 day of July, 2008, by Paul
Kirkitelos, President & CEO of Doral Energy Corp., a Nevada corporation.

	 	/s/
      Ellen Hageman 
	 	NOTARY PUBLIC, STATE OF CALIFORNIA
  

[SIGNATURE PAGE TO NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE] 

          IN
WITNESS WHEREOF, each of Assignor and Assignee has caused this Conveyance to be
executed in its name and behalf by its proper signatory officers thereunto duly
authorized, in multiple originals, effective as of the date first set forth in
this Conveyance. 

ASSIGNEE: 

MACQUARIE
INVESTMENTS, LLC, 
a Delaware limited
liability company 

	 	By:	/s/
      Brian Hughes 
	 	Name:	Brian
      Hughes 
	 	Title:	Executive Director 
	 		 
	 	By:	/s/
      Paul B. Beck 
	 	Name:	Paul
      B. Beck 
	 	Title:	Executive Director 

ACKNOWLEDGMENTS 

	STATE OF TEXAS 	§ 
	  	§ 
	COUNTY OF HARRIS 	§ 

          This
instrument was acknowledged before me on this 29th day of July, 2008, by
Brian B. Hughes, Executive Director of MACQUARIE
INVESTMENTS, LLC, a Delaware limited liability company. 

	 	/s/
      Linda S. Cox
	 	NOTARY PUBLIC, STATE OF TEXAS

	STATE OF TEXAS 	§ 
	  	§ 
	COUNTY OF HARRIS 	§ 

          This
instrument was acknowledged before me on this 29th day of July, 2008, by Paul
B. Beck, Executive Director of MACQUARIE INVESTMENTS, LLC, a
Delaware limited liability company. 

	 	/s/
      Linda S. Cox 
	 	NOTARY PUBLIC, STATE OF TEXAS

[SIGNATURE PAGE TO NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE] 

EXHIBIT A 

See attached. 

EXHIBIT B 

NPI Operating Statement 

See attached. 

DORAL ENERGY CORP

  Form of NPI Operating Statement 

  (schedules and supporting information to be attached) 

  Delivered: _____________, 20___.

I, ______________, the _______________ of Doral Energy Corp.
  (the "Company") hereby certifies that: (a) all of the information set forth
  herein and in all exhibits, attachments and/or schedules attached hereto, all
  of which are by reference true, correct and complete to the best of my knowledge,
  and (b) I have made a diligent effort to ensure that all facts relevant to the
  matters certified herein are known to me, by establishing and maintaining relevant
  records and procedures within the Company, and by making such inquiries as I
  have deemed necessary each month, procedures within the Company, of various
  officers, employees and/or consultants of the Company. This NPI Operating Statement
  is being delivered pursuant to that certain Net Profits Overriding Royalty Interest
  Conveyance dated effective July 29, 2008 (the "NPI Conveyance").

For purposes of this NPI Operating Statement, the term " Month"
  means ___________ 11, 20___. to ___________ 10, 20___.

	1. 	GROSS SALES VOLUMES. The gross
      sales volumes associated with the Gross Proceeds in item 2.

  	Crude Oil (Bbls) 	$	 - 	 
	Natural Gas (Mmbtu) 	$	 - 	 
	Flash Gas (Mcf) 	$	 - 	 

	2. 	GROSS PROCEEDS. The Gross Proceeds received
      by the Company during the Month are as follows:

  	Crude Oil 	$	 - 	 
	Natural Gas 	$	 - 	 
	Manufacturing Proceeds 	$	 - 	 
	Total 	$	 - 	 

	3. 	PRODUCTION COSTS. Production Costs paid
      and/or to be processed for payment by the Company with respect to the
      Month are as follows:

  	Direct costs of operating, producing, maintaining, adandoning and
        decommissioning. 	$	 - 	 
	Gathering, transporting, treating and marketing costs 	$	 - 	 
	Taxes (excluding taxes based upon the income of Assignor) 	$	 - 	 
	Manufacturing Costs 	$	 - 	 
	Less: 	 	 	 
	Net Sale proceeds of any materials, supplies, equipment and other
        personal property or fixtures 	$	 - 	 
	Insurance proceeds received by Assignor as a consequence a loss
        or damage 	$	 - 	 
	Proceeds from judgements and claims 	$	 - 	 
	Proceeds from delay
        rentals, lease bonuses, SI royalties or payments, reservoir use or storage
        rental, deferred drilling charges 	$	 - 	 
	Production & Capital Cost credits 	$	 - 	 
	Credits carried forward from previous months 	$	 - 	 
	Total 	$	 - 	 

	4 	Capital Costs. Capital Costs paid and/or
      to be processed for payment by the Company with respect to the Month are
      as follows:

  	Capital Costs 	$	 - 	 
	Total 	$	 - 	 

	5	NET PROFIT (item 2 less item 3 less item 4 )	 	$	 - 	 
	 	 	 	 	 	 
	6	 item 5) NET PROFITS OVERRIDING ROYALTY INTEREST
      (____% of(35% until USD $5M received by Assignee, 20% thereafter)

    	

       	$	 - 	 
	7	Remaining Net Profit 	 	$	 - 	 

Page 1 of 2

Attached as exhibits are a list of purchaser statements for the
  Month including copies, a list of all Production Cost payments made or processed
  for payment by the Company to any person with respect to the Month, indicating
  which category of Production Costs under item 3 that the payment relates, and
  a list of all Capital Cost payments made or processed for payment by the Company
  to any person with respect to the Month, indicating which AFE under item 4 that
  the payment relates including AFE estimate and funding to date.

 

	By: 	 	 
	 	 	 
	Name: 	 	 
	 	 	 
	Title: 	 	 
	 	 	 
	Date: 	 	 

Page 2 of 2Filed by sedaredgar.com - Doral Energy Corp. - Exhibit 10.8

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”), AND ARE BEING OFFERED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT. SUCH
SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER THE APPLICABLE PROVISIONS OF THE ACT OR ARE
EXEMPT FROM SUCH REGISTRATION. THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”)
OR BY ANY STATE SECURITIES ADMINISTRATION OR REGULATORY AUTHORITY. 

CONVERSION AGREEMENT 

          THIS
CONVERSION AGREEMENT (this “Agreement”) is entered into by and between,
MACQUARIE INVESTMENTS, LLC a Delaware limited liability company (together with
its successors and assigns, “MAC”) and DORAL ENERGY CORP., a Nevada
corporation (together with its successors and assigns, the “Company”).
MAC and the Company may be referred to herein individually as a “Party”
or collectively as the “Parties”). 

RECITALS 

          A.     
Macquarie Bank Limited (“MBL”) and the Company entered into a Senior
First Lien Secured Credit Agreement, dated July 29, 2008, (as the same may be
amended, modified or restated from time to time, the “Credit Agreement”).

          B.     
In connection with the Credit Agreement, the Company assigned to MAC a NPORRI
(defined below) in certain properties owned by the Company. 

          C.      MAC
and the Company have agreed that the NPORRI may be converted to common stock of
the Company upon the terms and conditions set forth in this Agreement. 

          NOW,
THEREFORE, in consideration of the mutual covenants and Agreements contained
herein, MAC and the Company do hereby agree as follows: 

ARTICLE I 
DEFINITIONS 

          1.1     
Definitions. As used herein, the following terms shall have the meanings
set forth below:

          “Acceptable
Investment Banks” means the investment banks identified on Schedule
I. 

          “Agreement”
shall have the meaning set forth in the introductory paragraph hereof and any
amendments, modifications or supplements hereto. 

          “Agreement
Shares” means the Common Shares into which the NPORRI may be converted
pursuant to this Agreement. 

          “Applicable
Percentage” shall have the meaning set forth in the NPORRI Conveyance. 

          “Approved
Exchange” means the American Stock Exchange or such other exchange as
approved by MAC in its discretion. 

          “Commission”
means the U.S. Securities and Exchange Commission or any other United States
Federal agency administering the Securities Act and/or the Exchange Act at the
time. 

          “Common
  Shares” means and includes the shares of common stock of the Company,
  par value $0.001 per share, or any such other securities (equity or debt)
  into which or for which such shares are converted, substituted or exchanged.

          “Company”
shall have the meaning set forth in the introduction hereto. 

          “Conversion”
means the conversion of the NPORRI into Common Shares of the Company pursuant to
the terms of this Agreement. 

          “Conversion
Conditions” means the following items or events: 

	 	(a) 	
      the Common Shares are listed on an Approved
    Exchange;

	 	 	 
	 	(b) 	
      not more than sixty-five percent (65%) of the issued and
      outstanding Common Shares are held by (i) direct or indirect beneficial
      owners (as defined in Rule 13d-3 of the Exchange Act) of more than ten
      percent (10%) of any Common Stock or any Convertible Securities of the
      Company, (ii) any officer (as defined in Rule 16a-1(f) of the Exchange
      Act) of the Company or (iii) any member of the Company’s board of
      directors; and

	 	 	 
	 	(c) 	
      the average trading volume of the Common Shares traded on
      an Approved Exchange over the sixty (60) trading days immediately prior to
      the Conversion Notice Date is equal to or greater than fifty percent (50%)
      of the Common Shares which are eligible to be traded on an Approved
      Exchange.

          “Conversion
Condition Date” means the first date on which all of the Conversion
Conditions have been satisfied. 

          “Conversion
Notice” shall have the meaning set forth in Section 2.1. 

          “Conversion
Notice Date” means the date of a Conversion Notice. 

          “Conversion
Rights” means the right to initiate a Conversion as set forth in Section
2.1. 

2 

          “Convertible
Securities” means debt instruments, units, interests or other securities
which are convertible into or exercisable or exchangeable for, with or without
payment of additional consideration in cash or property into, Common Shares,
either immediately or upon a specified date or the happening of a specified
event. 

          “Credit
Agreement” shall have the meaning set forth in the introductory paragraph
hereof. 

          “Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any successor
Federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time. 

          “GAAP”
means generally accepted accounting principles recognized as such by the
Financial Accounting Standards Board (or generally recognized successor)
consistently applied and maintained throughout the period indicated and
consistent with applicable laws, except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing. If any change in any accounting principle or practice is required by
the Financial Accounting Standards Board (or generally recognized successor) in
order for such principle or practice to continue as a generally accepted
principle or practice, all financial reports or statements required hereunder or
in connection herewith may be prepared in connection with such change, but all
calculations and determinations to be made hereunder may be made in accordance
with such change only if Borrower and the Administrative Agent agree to do so.
Whenever any accounting term is used herein which is not otherwise defined, it
shall be interpreted in accordance with GAAP. 

          “MAC”
shall have the meaning set forth in the preamble hereto. 

          “NPORRI”
means the Net Profits Overriding Royalty Interest conveyed to MAC by the Company
pursuant to that certain Net Profits Overriding Royalty Interest Conveyance
dated July ___, 2008 as the same may be amended, modified or supplemented from
time to time. 

          “NPORRI
Conveyance” means the conveyance or conveyances creating the NPORRI. 

          “NPORRI
Value” shall have the meaning set forth in Section 2.1(b). 

          “Person”
means an individual, corporation, partnership, limited liability company, joint
venture, trust or unincorporated organization, joint stock company or other
similar organization, Governmental Authority or any other legal entity, whether
acting in an individual, fiduciary or other capacity. 

          “Registrable
Securities” means (a) the Agreement Shares (whether or not the related
Conversion has been exercised) and (b) any other securities issued or issuable
with respect to this Agreement by way of stock dividends or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (i) they are sold pursuant to an effective Registration Statement under the
Securities Act, (ii) they 

3 

are sold pursuant to Rule 144 (or any similar provision then in
force under the Securities Act) and the transferee thereof does not receive
“restricted securities” as defined in Rule 144, (iii) they have been sold in a
private transaction in which the transferor’s rights under this Agreement are
not assigned to the transferee of the securities in accordance with Section
3.1 of this Agreement, or (iv) they become eligible for resale pursuant to
Rule 144 (or any similar rule then in effect) and MAC does not then beneficially
own more than one percent (1%) of such class of securities and MAC may sell all
of such securities within a ninety (90) day period. No Registrable Securities
may be registered under more than one Registration Statement at any one time.

          “Sales
Price” means, on the relevant date, the closing sale price per share, or if
no closing sale price is reported, the average bid and asked prices or, if more
than one, in either case, the average of the average bid and average asked
prices, on such date as reported in transactions for the Approved Exchange, in
each case without reference to after-hours or extended market trading. 

          “Securities
Act” means the United States Securities Act of 1933, as amended, or any
successor United States Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time. 

          “Subject
Interests” means the properties of the Company subject to and burdened by
the NPORRI. 

          “VWAP”
means, as of any date of determination, the volume weighted average of the Sales
Price of the Common Shares for the applicable period, appropriately adjusted to
take into account the occurrence, during the applicable period, of any action of
event described in Section 2.7. 

          Other
capitalized terms used in this Agreement but not otherwise defined herein shall
have the meanings set forth in the NPORRI Conveyance. 

          1.2     
Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to MAC hereunder shall be prepared, in accordance with
GAAP. All calculations made for the purposes of determining compliance with the
terms of this Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP. 

          1.3     
Rules of Construction. The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and shall not
govern or affect the interpretation of any of the terms or provisions of this
Agreement. The use herein of the masculine, feminine or neuter forms shall also
denote the other forms, as in each case the context may require. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. In the case of this Agreement, (a) the meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms; (b)
Annex, Exhibit, Schedule and Section references 

4 

are to this Agreement unless otherwise specified; (c) the term
“including” is not limiting and means “including but not limited to;” (d) in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including” the words “to” and “until” each mean
“to but excluding,” and the word “through” means “to and including;” (e) unless
otherwise expressly provided in this Agreement, (i) references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of the
Agreement, and (ii) references to any statute or regulation shall be
construed as including all statutory and regulatory provisions amending,
replacing, supplementing or interpreting such statute or regulation; (f) this
Agreement may use several different limitations, tests or measurements to
regulate the same or similar matters, all of which are cumulative and each shall
be performed in accordance with its terms; and (g) this Agreement is the result
of negotiations among and have been reviewed by counsel to the Company and the
other parties thereto and are the products of all parties; accordingly, they
shall not be construed against MAC merely because of MAC’s involvement in their
preparation. 

ARTICLE II 
CONVERSION 

          2.1      Conversion.

                         (a)     
Upon all of the Conversion Conditions having been satisfied, either Party shall,
for a period of ten (10) years after the Conversion Condition Date, have the
right to initiate a Conversion by providing written notice thereof to the other
Party. A Conversion may not be a partial conversion. A Conversion Notice, once
delivered, shall be irrevocable. Notwithstanding the forgoing, if a Conversion
Condition Date shall not have occurred within ten (10) years after the date of
this Agreement as set out below, the Conversion Rights shall expire and shall
not be exercisable by either Party. 

                         (b)      Upon
receipt of the Conversion Notice by the receiving Party, the Parties shall
select three Acceptable Investment Banks to value the NPORRI. Such valuation
shall be accomplished by multiplying the Applicable Percentage by the average of
the fair market values of the Subject Interests (as determined as the Conversion
Notice Date by each of the selected Acceptable Investment Banks) less
indebtedness owed to MBL by the Company (the “NPORRI Value”). The
Parties will utilize commercially reasonable efforts to complete this valuation
process within ninety (90) days following the Conversion Notice. MAC shall bear
all costs relating to the determination of the NPORRI Value. 

                         (c)     
Within five (5) days after the determination of the NPORRI Value, MAC shall
deliver a Termination and Reassignment of the NPORRI in substantially the form
as attached hereto as Exhibit A to the Company. 

                         (d)     
Contemporaneously with the delivery of the Termination and Reassignment, the
Company shall issue and deliver, or cause to be issued and delivered, to MAC a
certificate or certificates for the full number of Common Shares calculated
pursuant to Section 2.2. As permitted 5 

by applicable law, any Person in whose name the certificates
for Common Shares are to be issued shall be deemed to have become a shareholder
of record of such Common Shares effective as of the Conversion Notice Date and
shall be entitled to all of the benefits of such shareholder on the Conversion
Notice Date, including the right to receive dividends and other distributions
for which the record date falls on or after the Conversion Notice Date and to
exercise voting rights. 

          2.2     
  Agreement Shares. Upon satisfaction of the conditions set forth in Section
  2.1, the number of shares that the Company shall deliver to MAC shall be
  determined by dividing the NPORRI Value by the VWAP for the sixty (60) trading
  days preceding the Conversion Notice Date.

          2.3      Expenses
and Taxes. The Company shall pay all expenses and taxes (including all
documentary, stamp, transfer or other transactional taxes) attributable to the
preparation, issuance or delivery of this Agreement and of the Common Shares
issuable upon exercise of this Agreement, other than income taxes. 

          2.4     
Reservation of Common Shares. So long as the Conversion Rights remain
unexercised, the Company shall reserve, free from preemptive or similar rights,
out of its authorized but unissued Common Shares, and solely for the purpose of
effecting the exercise of this Agreement, a sufficient number of Common Shares
to provide for the exercise of this Agreement. 

          2.5      Valid
Issuance. All Common Shares issued upon exercise of the Conversion Rights
will, upon delivery of the Termination and Reassignment and issuance by the
Company, be duly authorized, validly and legally issued, fully paid and
nonassessable and free and clear of all taxes, liens, security interests,
charges and other encumbrances or restrictions with respect to the issuance
thereof and, without limiting the generality of the foregoing, the Company shall
take all actions necessary to ensure such result and shall not take any action
which will cause a contrary result. 

          2.6     
Acknowledgment of Rights. At the time of the exercise of the Conversion
Rights in accordance with the terms hereof and upon the written request of MAC,
the Company will acknowledge in writing its continuing obligation to afford to
MAC any rights to which MAC shall continue to be entitled after such exercise in
accordance with the provisions of this Agreement; provided, however, that if MAC
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to MAC any such rights. 

          2.7     
Adjustment of Number of Shares. To prevent dilution of the rights granted
under this Agreement after the Conversion Notice Date, the Sales Price and the
number of Common Shares issuable upon the proper exercise of the Conversion
Rights are subject to adjustment from time to time as follows: 

                         (a)     
Conversion or Redemption of Common Shares. Should all of the Common
Shares be redeemed, exchanged, substituted or converted into shares or any other
security of the Company (the “Exchanged Securities”), then the Conversion
Rights shall become immediately exercisable for that number of the Exchanged
Securities equal to the number of Exchanged Securities that would have been
received if the Conversion Rights had been exercised in full 

6 

immediately prior to such redemption, exchange, substitution or
conversion, and the Common Shares received thereupon had been subsequently
redeemed, exchanged, substituted, or converted upon the occurrence of such
event, and the Sales Price shall immediately be adjusted to equal the quotient
obtained by dividing (i) the aggregate Sales Price of the maximum number
of shares of Common Shares for which this Agreement was exercisable immediately
prior to such conversion, exchange, substitution or redemption, by (ii)
the number of Exchange Securities for which this Agreement is exercisable
immediately after such conversion, exchange, substitution or redemption. 

                         (b)     
Offer. If there shall be an offer for all of the Common Shares, whether
in the form of cash, securities or otherwise, then, as a part of such offer,
lawful provision shall be made so that MAC shall thereafter be entitled to
receive upon exercise of the Conversion Rights contained in this Agreement, the
number of shares or other securities of the offeror that a shareholder of the
Common Shares issuable upon Conversion would have been entitled to receive in
such offer if this Agreement had been exercised immediately before such offer,
all subject to further adjustment as provided in this Section 2.7. The
foregoing provisions of this Section 2.7(b) shall similarly apply to
successive offers and to the shares that are at the time receivable upon the
exercise of this Agreement. If the per-share consideration payable to MAC for
shares in connection with any such offer is in a form other than cash or
marketable securities, then the value of such consideration shall be determined
in good faith by the Company’s Board of Directors. In all events, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors)
shall be made in the application of the provisions of this Agreement with
respect to the rights and interests of MAC after the transaction, to the end
that the provisions of this Agreement shall be applicable after that event, as
near as reasonably may be, in relation to any shares or other property
deliverable after that event upon Conversion. 

                         (c)      Reclassification.
If the Company shall change any of the securities as to which purchase rights
under this Agreement exist into the same or a different number of securities of
any other class or classes, this Agreement shall thereafter represent the right
to acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Agreement immediately prior to such reclassification
or other change and the Sales Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 2.7. No
adjustment shall be made pursuant to this Section 2.7(c), upon any
conversion, exchange, substitution or redemption of the Common Shares that is
the subject of Section 2.7(a). 

                         (d)     
Split, Subdivision or Combination of Shares. If the Company shall split,
subdivide or consolidate the securities as to which purchase rights under this
Agreement exist, into a different number of securities of the same class, the
Sales Price for such securities shall be proportionately decreased in the case
of a split or subdivision or proportionately increased in the case of a
combination. 

                         (e)      Adjustments
for Dividends in Shares or Other Securities or Property. If the Person to
which Conversion Rights are vested at the time shall have received, or, on or
after the record date fixed for the determination of eligible shareholders,
shall have become entitled to 

7 

receive, without payment therefor, other or additional shares
or other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Agreement shall represent the right to
convert, in addition to the number of shares of the security receivable upon
exercise of this Agreement, and without payment of any additional consideration
therefor, the amount of such other or additional shares or other securities or
property (other than cash) of the Company that such Person would hold on the
date of such exercise had it been the Person of record of the security
receivable upon Conversion on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such Conversion,
retained such shares and/or all other additional shares available by it as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 2.7. 

                         (f)      Other
Dilutive Events. In case any event shall occur as to which the provisions of
this Section 2.7 are not strictly applicable, but the failure to make any
adjustment would not fairly protect the Conversion Rights presented by this
Agreement in accordance with the essential intent and principles of this
Section 2.7, then, in each such case, the Company shall make a good faith
adjustment to the number of Common Shares to which MAC is entitled upon the
proper exercise of the Conversion Rights in accordance with the intent of this
Section 2.7 and, upon the written request of MAC, shall appoint an
independent financial expert, which shall give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles of this Section 2.7. 

                         (g)      Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment
pursuant to this Section 2.7, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to MAC a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request, at any time, of MAC, furnish or
cause to be furnished to MAC a like certificate setting forth: (i) such
adjustments and readjustments, and (ii) the number of shares and the amount, if
any, of other property that at the time would be received upon the exercise of
any Conversion Rights under this Agreement. 

                         (h)     
  No Impairment. The Company will not, by any voluntary action, avoid or
  seek to avoid the observance or performance of any of the terms to be observed
  or performed hereunder by the Company, but will at all times in good faith assist
  in the carrying out of all the provisions of this Section 2.7 and in
  the taking of all such action as may be necessary or appropriate in order to
  protect the rights of MAC under this Agreement against impairment.

          2.8      No
Fractional Common Shares. The Company shall not be required to issue any
fractional Common Share on the exercise of this Agreement. The number of full
Common Shares which shall be issuable upon such exercise shall be computed on
the basis of the aggregate number of whole Common Shares deliverable upon
Conversion. If any fraction of a Common Share would, except for the provisions
of this Section 2.8, be issuable on the exercise of this Agreement, the
Company shall round up the total number of Common Shares purchasable hereunder
to the next whole Common Share. 

8 

          2.9     
Restricted Securities. MAC hereby agrees that the Agreement Shares to be
issued by the Company upon the proper exercise of the Conversion Rights will be
“restricted securities” under the Securities Act in that the Agreement Shares
will be issued pursuant to an exemption to the registration requirements of the
Securities Act, and MAC hereby represents, warrants and covenants to and with
the Company as follows: 

                         (a)      MAC
is, and on the Conversion Notice Date will be, an “accredited investor” as that
term is defined in Regulation D promulgated under the Securities Act. 

                         (b)      All
certificates representing the Agreement Shares will be endorsed with a
restrictive legend substantially similar to the following: 

  
    “THE SECURITIES REPRESENTED BY THIS CERTIFICATE
      HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"),
      AND HAVE BEEN OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
      REQUIREMENTS OF THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR
      RESOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE APPLICABLE
      PROVISIONS OF THE ACT OR ARE EXEMPT FROM SUCH REGISTRATION.” 

  

                         (c)     
MAC is, and at the Conversion Notice Date will be, acquiring the Agreement
Shares for MAC’s own account, not as nominee or agent, and not with a view
toward the resale or distribution of any part thereof. MAC has no present
intention of selling, granting any participation in, or otherwise distributing
the Agreement Shares, and does not, and at the Conversion Notice Date, will not,
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person, or to any third party,
with respect to any of the Agreement Shares. 

Notwithstanding any provisions of this Agreement to the
contrary, the Company shall have no obligation to issue the Agreement Shares
upon the exercise of the Conversion Rights unless at the Conversion Notice Date
(i) there shall be an effective registration under the Securities Act with
respect thereto, or (ii) there is an available exemption from the registration
requirements of the Securities Act. 

ARTICLE III 
TRANSFER 

          3.1      Restrictions
on Transfer of Conversion Rights.

                         (a)      The
Agreement and the Conversion Rights hereunder are not transferable directly or
indirectly, in whole or in part, except in the case where MAC shall have
furnished to the Company, if requested, an opinion of legal counsel reasonably
satisfactory to the Company that such transfer is in compliance with applicable
U.S. federal and state securities laws, including the Securities Act. Any
transfers of this Agreement will be without charge to MAC except that any 9 

securities transfer taxes due on transfer of this Agreement
will be paid by MAC. Restrictive legends setting forth the above restrictions on
transfer will be set forth on any Agreement Shares issued on exercise of the
Conversion Rights. Notwithstanding the forgoing, any assignment, conveyance or
transfer made under this Section 3.1(a) shall be accompanied by a similar
assignment, conveyance or transfer of the NPORRI to such transferee of this
Agreement and the Conversion Rights. The rights and obligations of the Company
and MAC under this Agreement shall be binding upon and benefit their respective
permitted successors, assigns, heirs, administrators and transferees. 

                         (b)      Notwithstanding
Section 3.1(a), subject to the requirement that MAC furnish to the
Company, if requested, an opinion of legal counsel, reasonably satisfactory to
the Company that a transfer is in compliance with all applicable U.S. federal
and state securities laws, including the Securities Act, MAC may assign, convey
or transfer this Agreement and any rights hereunder without the prior written
consent of the Company to any Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
MAC or the parent of MAC, or a successor in interest to MAC which acquires the
voting control of MAC or all or substantially all of MAC’s assets (collectively,
the “MAC Affiliates”). Notwithstanding the forgoing, any assignment,
conveyance or transfer made under this Section 3.1(b) shall be
accompanied by a similar assignment, conveyance or transfer of the NPORRI to
such MAC Affiliate. The rights and obligations of the Company and MAC under this
Agreement shall be binding upon and benefit their respective permitted
successors, assigns, heirs, administrators and transferees. 

          3.2     
Restrictions on Transfer of the Agreement Shares. The Agreement Shares
may be resold or transferred pursuant only to an effective registration under
the Securities Act or to an available exemption from the registration
requirements of the Securities Act and the Company may refuse to register any
resale or transfer of the Agreement Shares not made pursuant to an effective
registration under the Securities Act or to an available exemption from the
registration requirements of the Securities Act. 

ARTICLE IV 
REGISTRATION RIGHTS 

          4.1     
Piggy-Back Registration Rights. If, at any time, the Company determines
to register any of its securities under the Securities Act for sale to the
public, whether for its own account or for the account of other security holders
or both (other than a registration statement on Form S-4 or S-8 or any successor
form) each such time it will give prompt written notice (but in no event less
than five business days prior to the anticipated filing date) to MAC of its
intention to do so and of the proposed method of distribution of such
securities, and such notice shall offer MAC the opportunity to register such
number of Registrable Securities as MAC may request in writing within five
business days after receipt of such written notice from the Company. Upon the
written request of MAC, which request must be received by the Company within
five business days after the giving of any such notice by the Company and shall
specify the Registrable Securities intended to be disposed of by MAC, the
Company will use all reasonable efforts to cause the Registrable 

10 

Securities as to which registration shall have been so
requested under this Section 4.1 to be included in the securities to be
covered by the registration statement proposed to be filed by the Company, all
to the extent and under the conditions such registration is permitted under the
Securities Act. In the event that any registration pursuant to this Section
4.1 shall be, in whole or in part, an underwritten public offering of Common
Shares, the number of shares of Registrable Securities to be included in such an
underwriting may be reduced if and to the extent that the managing underwriter
shall be of the opinion that the inclusion of some or all of the Registrable
Securities would adversely affect the marketing of the securities to be sold by
the Company therein. Any such limitation shall be imposed in such manner so as
to avoid any diminution in the number of shares the Company may register for
sale by giving first priority for the shares to be registered for issuance and
sale by the Company, and by giving second priority to the Registrable Securities
along with any other shares to be registered for sale by any shareholder of the
Company pursuant to the terms of any other agreement. Notwithstanding the
foregoing provisions, the Company may, in its sole discretion, terminate or
withdraw any registration statement referred to in this Section 4.1
without thereby incurring any liability to holders of Registrable Securities.

          4.2      Additional
  Provisions Concerning Registration. The following provisions of this Section
  4.2 are applicable to any registration statement filed pursuant to Section
  4.1:

                         (a)     
Costs and Expenses. The Company shall bear the entire cost and expense of
any registration or qualification of securities initiated under Section
4.1 of this Agreement. Notwithstanding the foregoing, MAC shall, however,
bear the fees of its own counsel and accountants and any transfer taxes or
underwriting discounts or commissions applicable to Agreement Shares sold by MAC
pursuant thereto. 

                         (b)     
Indemnification. The Company shall indemnify and hold harmless MAC and
each underwriter, within the meaning of the Securities Act, who may purchase
from or sell for MAC any Agreement Shares from and against any and all losses,
claims, damages and liabilities (including reasonable fees and expenses of
counsel, which counsel may, if MAC requests, be separate from counsel for the
Company) caused by any untrue statement or alleged untrue statement of material
fact contained in the registration statement or any post-effective amendment
thereto or any registration statement under the Securities Act or any prospectus
included therein required to be filed or furnished by reason of this Article
IV or any application or other filing under any state securities law caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading to
which MAC or any such underwriter or any of them may become subject under the
Securities Act or other Federal or state statutory law or regulation, at common
law or otherwise, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or alleged untrue statement or omission
or alleged omission based upon information furnished to the Company by MAC or
underwriter expressly for use therein, which indemnification includes each
Person, if any, who controls any such underwriter within the meaning of the
Securities Act. 

                         (c)      Blue
Sky. If necessary, the Company shall use its reasonable efforts to qualify
the Agreement Shares for sale in such states as it is otherwise qualifying its
securities for 

11 

sale, or in respect of any registration required pursuant to
this Article IV, in such states as are reasonably requested by MAC.
However, in no event is the Company required to submit to the jurisdiction of
any state other than for the limited consent of service of process relating to
the offering or subject itself to taxation in any such jurisdiction. The Company
shall also provide MAC with a reasonable number of prospectuses upon request.

          4.3      Information
by MAC. MAC shall furnish to the Company such information regarding MAC, the
Registrable Securities held by MAC, and the distribution proposed by MAC of
Registrable Securities as the Company may reasonably request in writing and as
shall be required in connection with any registration (including any amendment
to a registration statement or prospectus), qualification or compliance referred
to in this Section 4.3. 

          4.4     
Lock-Up Agreements. MAC shall agree to be bound by such lock-up
agreements (not to exceed a period of one hundred eighty (180) days following
the date of the prospectus relating to any such underwriting) as the managing
underwriter of any such registration shall specify as a requirement to any such
underwriting, provided that the entry of MAC into such agreements shall be
conditioned upon all principal shareholders (i.e., all shareholders who
could reasonably be expected to be considered by the applicable underwriters to
be affiliates of the Company) and executive officers and directors of the
Company also agreeing to execute such lockup agreements. 

          4.5      Changes
in Common Shares or Agreement Shares. If, and as often as, there is any
change in the Common Shares or the Agreement Shares by way of a stock split,
stock dividend, combination, or reclassification, or through a merger,
consolidation, reorganization, or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted in this Article IV shall continue with respect to
the Common Shares or the Agreement Shares as so changed. 

          4.6     
Rule 144. During any period in which the Company is subject to Section 13
or Section 15(d) of the Exchange Act, the Company will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder and will take such further
action as MAC may reasonably request, all to the extent required from time to
time to enable MAC to sell the securities underlying this Agreement without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of MAC, the Company will deliver to MAC a
written statement as to whether it has complied with such requirements. After
any sale of Registrable Securities pursuant to this Article IV, the
Company will, to the extent allowed by law, cause any restrictive legends to be
removed and any transfer restrictions to be rescinded with respect to such
Registrable Securities. 

          4.7      Exchange
Acceptance. As applicable, the Company will, at its expense, apply to and
obtain acceptance from such exchange, market or listing or quotation service or
bureau where its Common Shares are primarily traded, listed or quoted, for the
Agreement Shares, and maintain listing on such exchange, market or quotation
service bureau where the Company’s Common 

12 

Shares are primarily traded, listed or quoted, of all Agreement
Shares or other securities from time to time issuable upon the exercise or
exchange of this Agreement. 

          4.8      Contribution.
If the indemnification provided for in Section 4.2(b) from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.8 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. 

          4.9      Continuation.
The Company’s agreements as set out in this Article IV shall continue in
effect for the Agreement Shares regardless of the exercise of the Conversion
Rights, for so long as there shall be Registrable Securities. 

          4.10     
Damages. The Company recognizes and agrees that MAC will suffer
irreparable harm and will not have an adequate remedy at law if the Company
fails to comply with any provision of this Article IV, and the Company
expressly agrees that, in the event of such failure, MAC or any other Person
entitled to the benefits of Article IV shall be entitled to seek specific
performance of any and all provisions hereof and may seek to enjoin the Company
from continuing to commit any further breach of this Article IV. 

          4.11     
  No Inconsistent Agreements. The Company has not entered into and will
  not enter into any registration rights agreement or similar arrangements the
  performance by the Company of the terms of which would in any manner conflict
  with, restrict or be inconsistent with the performance by the Company of its
  obligations under this Agreement.

13 

ARTICLE V 
MISCELLANEOUS 

          5.1     
Entire Agreement. This Agreement and the Credit Agreement contain the
entire agreement between MAC and the Company with respect to the Conversion and
supersedes all prior arrangements or understandings with respect thereto. 

          5.2     
GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES. 

          5.3      Waiver
and Amendment. Any term or provision of this Agreement may be waived at any
time by the Party which is entitled to the benefits thereof. Any term or
provision of this Agreement may be amended or supplemented at any time by
agreement of MAC hereof and the Company. Any waiver of any term or condition, or
any amendment or supplementation, of this Agreement shall be in writing. A
waiver of any breach or failure to enforce any of the terms or conditions of
this Agreement shall not in any way affect, limit or waive a Party’s rights
hereunder at any time to enforce strict compliance thereafter with every term or
condition of this Agreement. 

          5.4     
Severability. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Agreement shall not, at the election of the Party for whom
the benefit of the provision exists, be in any way impaired. 

          5.5     
Copy of Agreements. A copy of this Agreement shall be filed among the
records of the Company. 

          5.6     
Notice. Any notice or other document required or permitted to be given or
delivered to MAC shall be in writing and delivered at, or sent by certified or
registered mail or by facsimile to MAC at, the last address shown on the books
of the Company maintained at the Principal Office of the Company for the
registration of this Agreement or at any more recent address of which MAC shall
have notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Principal Office of the Company, shall
be delivered at, or sent by certified or registered mail or by facsimile to, the
Principal Office of the Company. 

          5.7     
Limitation of Liability; Rights as a Shareholder. No provision hereof, in
the absence of affirmative action by the Parties to initiate a Conversion as
provided in this Agreement to exercise the Conversion, and no mere enumeration
herein of the rights or privileges of MAC, shall give rise to any liability or
obligation of MAC to effectuate a Conversion or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company. Except as otherwise provided herein, this Agreement does not confer
upon MAC any right to vote 

14 

or consent to or to receive notice as a shareholder of the
Company, in respect of any matters whatsoever. 

[The Remainder of this Page Intentionally Left Blank] 

15 

          IN
WITNESS WHEREOF, the Parties have caused this Agreement to be signed in their
names. 

          Dated:
July 29, 2008. 

DORAL ENERGY
  CORPORATION

	 	By: 	/s/
      Paul Kirkitelos 
	 	  	       Paul Kirkitelos
  
	 	  	       President & CEO
    

 

MACQUARIE
INVESTMENTS, LLC., 
a Delaware limited liability
company 

	 	By: 	/s/
      Brian Hughes 
	 	Name: 	Brian
      Hughes 
	 	Title: 	Executive Director 
	 	  	  
	 	  	  
	 	By: 	/s/
      Paul B. Beck 
	 	Name: 	Paul
      B. Beck 
	 	Title: 	Executive Director 

SIGNATURE PAGE TO THE CONVERSION AGREEMENT

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