Exhibit 10.1

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STOCK PURCHASE AGREEMENT

by and among

BPZ Energy, Inc. and
the Investors Named Herein

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Dated May 4, 2007

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated May 4, 2007, is made by
and among BPZ Energy, Inc., a Colorado corporation (the “Company”), and the
Investors named on Schedule 1.1 hereto (the “Investors”).

RECITALS

WHEREAS, the Company has received from each Investor a Purchaser Suitability
Questionnaire (the “Questionnaire”) relating to the transactions contemplated in
this Agreement, and each Investor has executed a Confidentiality Agreement
relating to the Company’s business and each Investor acknowledges that he has
been given full access by the Company to all information concerning the business
and financial condition, properties, operations and prospects of the Company
that Investor has deemed relevant for purposes of making the investment
contemplated by this Agreement.

WHEREAS, the Company proposes to issue and sell to Investors, and Investors
desire to purchase from the Company, shares of the Company’s common stock, no
par value (the “Common Stock”), on the terms set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

1.             Purchase

1.1           Purchase and Sale of Stock.  Subject to the terms and conditions
of this Agreement, the Company will issue and sell to each Investor, and each
Investor severally agrees to purchase from the Company, the number of shares of
the Company’s authorized but unissued Common Stock (the “Shares”) set forth with
respect to such Investor on Schedule 1.1 hereto, at a price per share equal to
$5.25.  The closing (the “Closing”) of the sale of the Shares shall be effected
at the offices of the Company on May 4, 2007, or at such other time and place as
may be agreed to by the Investors and the Company (the “Closing Date”).  At the
Closing, subject to the terms and conditions hereof, the Company shall cause the
issuance of the Shares purchased by such Investor from the Company, against
payment of the full amount of such Investor’s aggregate purchase price by wire
transfer of immediately available funds to the Company’s bank account.

1.2           LEGENDS.  ALL CERTIFICATES REPRESENTING THE SHARES SHALL BEAR THE
FOLLOWING LEGEND (IN ADDITION TO ANY LEGEND REQUIRED BY THE BLUE SKY OR
SECURITIES LAWS OF ANY STATE OR JURISDICTION TO THE EXTENT SUCH LAWS ARE
APPLICABLE TO THE SHARES REPRESENTED BY THE CERTIFICATE SO LEGENDED):

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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS, PROVIDED THAT THE
SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION AND COUNSEL
ARE REASONABLY SATISFACTORY TO THE COMPANY) CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION.”

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped within three business days of following delivery by Investor to the
Company or the Company’s transfer agent of a certificate representing Shares,
if, unless otherwise required by state securities laws, (i) such Shares are
registered for resale under the Securities Act of 1933, as amended (the
“Securities Act”), (ii) in connection with a sale, assignment or other transfer,
such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the
Shares may be made without registration under the applicable requirements of the
Securities Act, or (iii) such holder provides the Company with reasonable
assurance that the Shares can be sold, assigned or transferred pursuant to Rule
144 or Rule 144A promulgated under the Securities Act.

1.3           STOP TRANSFER ORDERS.  ALL CERTIFICATES REPRESENTING THE SHARES
WILL BE SUBJECT TO A STOP TRANSFER ORDER WITH THE DEPOSITORY TRUST COMPANY OR
WITH THE COMPANY’S TRANSFER AGENT THAT RESTRICTS THE TRANSFER OF SUCH SHARES
EXCEPT IN COMPLIANCE WITH THIS AGREEMENT.

2.             Representations and Warranties of the Company.  The Company
hereby makes the following representations and warranties to the Investors:

2.1           ORGANIZATION, ETC.  THE COMPANY IS A CORPORATION, DULY ORGANIZED
AND VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE OF
COLORADO, AND IS QUALIFIED OR LICENSED TO DO BUSINESS AND IS IN GOOD STANDING AS
A FOREIGN CORPORATION IN EACH OTHER JURISDICTIONS IN WHICH THE CONDUCT OF ITS
BUSINESS OR THE OWNERSHIP OF PROPERTY REQUIRES SUCH QUALIFICATION OR LICENSING,
EXCEPT WHERE FAILURE TO BE SO QUALIFIED OR LICENSED WOULD NOT HAVE A MATERIAL
ADVERSE EFFECT ON THE FINANCIAL CONDITION OR OPERATIONS OF THE COMPANY AND ITS
SUBSIDIARIES (AS DEFINED BELOW), TAKEN AS A WHOLE (FOR THE COMPANY AND ITS
SUBSIDIARIES, A “MATERIAL ADVERSE EFFECT”).  EACH COMPANY (EACH, A “SUBSIDIARY”)
LISTED ON SCHEDULE 2.1 HEREOF IS DULY ORGANIZED AND VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS ORGANIZATION, AND IS
QUALIFIED OR LICENSED TO DO BUSINESS AND IS IN GOOD STANDING AS A FOREIGN
CORPORATION IN EACH OTHER JURISDICTION IN WHICH THE CONDUCT OF ITS BUSINESS OR
THE OWNERSHIP OF PROPERTY REQUIRES SUCH QUALIFICATION OR LICENSING, EXCEPT WHERE
FAILURE TO BE SO QUALIFIED OR LICENSED WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.  EXCEPT FOR THE SUBSIDIARIES, THE COMPANY DOES NOT OWN, OF RECORD OR
BENEFICIALLY, THE SECURITIES OF ANY OTHER ENTITY.

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2.2           AUTHORITY.  THE COMPANY HAS THE CORPORATE POWER AND AUTHORITY TO
EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER, AND
SUCH ACTION HAS BEEN DULY AUTHORIZED BY ALL NECESSARY ACTION OF THE COMPANY’S
BOARD OF DIRECTORS.  THE ISSUANCE AND SALE OF THE SHARES HAS BEEN DULY
AUTHORIZED AND IF, AS AND WHEN ISSUED IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT AND DELIVERED TO THE INVESTORS, THE SHARES WILL BE DULY AND VALIDLY
ISSUED AND OUTSTANDING, FULLY PAID AND NON-ASSESSABLE AND WILL BE FREE OF ANY
ENCUMBRANCE (AS DEFINED BELOW) CREATED BY THE COMPANY, IN THE COMPANY’S CONTROL,
OR OF WHICH THE COMPANY HAS ACTUAL KNOWLEDGE, OTHER THAN THOSE IMPOSED PURSUANT
TO THIS AGREEMENT AND SECURITIES LAWS OF GENERAL APPLICATION.  AS USED IN THIS
AGREEMENT, “ENCUMBRANCE” SHALL MEAN ANY CLAIM, LIEN, PLEDGE, OPTION, CHARGE,
EASEMENT, SECURITY INTEREST, DEED OF TRUST, MORTGAGE, RIGHT OF WAY,
ENCROACHMENT, PRIVATE BUILDING OR USE RESTRICTION, CONDITIONAL SALES AGREEMENT,
ENCUMBRANCE OR OTHER RIGHT OF THIRD PARTIES, WHETHER VOLUNTARILY INCURRED OR
ARISING BY OPERATION OF LAW, AND INCLUDES, WITHOUT LIMITATION, ANY AGREEMENT TO
GIVE ANY OF THE FOREGOING IN THE FUTURE, AND ANY CONTINGENT SALE OR OTHER
TITLE.  EXCEPT AS SET FORTH IN SCHEDULE 2.2, THE ISSUANCE AND SALE OF THE SHARES
WILL NOT BE SUBJECT TO PREEMPTIVE OR OTHER SIMILAR RIGHTS OF ANY HOLDER OF THE
COMPANY’S SECURITIES.

2.3           ENFORCEABILITY.  THIS AGREEMENT HAS BEEN DULY EXECUTED AND
DELIVERED BY THE COMPANY AND CONSTITUTES A LEGAL, VALID AND BINDING AGREEMENT
AND OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS
TERMS SUBJECT TO BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER
SIMILAR LAWS NOW OR HEREAFTER IN EFFECT GENERALLY RELATING TO OR AFFECTING
CREDITORS’ RIGHTS.

2.4           NO VIOLATION.  EXCEPT AS SET FORTH ON SCHEDULE 2.4, THE EXECUTION
AND THE DELIVERY BY THE COMPANY OF THIS AGREEMENT AND THE PERFORMANCE BY THE
COMPANY OF ITS OBLIGATIONS HEREUNDER, INCLUDING THE ISSUANCE AND SALE OF THE
SHARES, DOES NOT AND WILL NOT (I) CONFLICT WITH OR RESULT IN A BREACH OF THE
TERMS, CONDITIONS OR PROVISIONS OF, (II) CONSTITUTE A DEFAULT UNDER (OR AN EVENT
THAT WITH NOTICE OR LAPSE OF TIME WOULD BECOME A DEFAULT), (III) RESULT IN A
VIOLATION OF, OR (IV) REQUIRE ANY AUTHORIZATION, CONSENT OR APPROVAL NOT
HERETOFORE OBTAINED PURSUANT TO, (A) ANY BINDING WRITTEN OR ORAL AGREEMENT OR
INSTRUMENT INCLUDING, WITHOUT LIMITATION, ANY CHARTER, BYLAW, TRUST INSTRUMENT,
INDENTURE OR EVIDENCE OF INDEBTEDNESS, LEASE, CONTRACT OR OTHER OBLIGATION OR
COMMITMENT (EACH, A “CONTRACTUAL OBLIGATION”) BINDING UPON THE COMPANY OR ANY
SUBSIDIARY OR ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS, OR (B) ANY LAW,
RULE, REGULATION, RESTRICTION, ORDER, WRIT, JUDGMENT, AWARD, DETERMINATION,
INJUNCTION OR DECREE OF ANY COURT OR GOVERNMENT, OR ANY DECISION OR RULING OF
ANY ARBITRATOR (EACH, A “REQUIREMENT OF LAW”) BINDING UPON OR APPLICABLE TO THE
COMPANY OR ANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS AND
WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.

2.5           LITIGATION.  EXCEPT AS SET FORTH IN SCHEDULE 2.5 OR THE SEC
REPORTS (AS DEFINED IN SECTION 2.7 BELOW), THERE ARE NO PENDING OR OVERTLY
THREATENED ACTIONS, CLAIMS, ORDERS, DECREES, INVESTIGATIONS, SUITS OR
PROCEEDINGS BY OR BEFORE ANY GOVERNMENTAL AUTHORITY, ARBITRATOR, COURT OR
ADMINISTRATIVE AGENCY WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.

2.6           CAPITALIZATION.  THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
CONSISTS OF 250,000,000 SHARES OF COMMON STOCK, NO PAR VALUE, 54,497,869 SHARES
OF WHICH HAVE BEEN

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VALIDLY ISSUED AND ARE OUTSTANDING AS OF MARCH 31, 2007, AND 25,000,000 SHARES
OF PREFERRED STOCK, NO PAR VALUE, NONE OF WHICH ARE ISSUED OR OUTSTANDING AS OF
MARCH 31, 2007.  EXCEPT AS SET FORTH ON SCHEDULE 2.6, THE COMPANY OWNS 100% OF
THE CAPITAL STOCK OF EACH OF THE SUBSIDIARIES.  EXCEPT AS SET FORTH ON SCHEDULE
2.6 HERETO, THERE DO NOT EXIST ANY OTHER AUTHORIZED OR OUTSTANDING SECURITIES,
OPTIONS, WARRANTS, CALLS, COMMITMENTS, RIGHTS TO SUBSCRIBE OR OTHER INSTRUMENTS,
AGREEMENTS OR RIGHTS OF ANY CHARACTER, OR ANY PREEMPTIVE RIGHTS, CONVERTIBLE
INTO OR EXCHANGEABLE FOR, OR REQUIRING OR RELATING TO THE ISSUANCE, TRANSFER OR
SALE OF, ANY SHARES OF CAPITAL STOCK OR OTHER SECURITIES OF THE COMPANY OR ANY
SUBSIDIARY.  THE COMMON STOCK IS LISTED ON THE AMERICAN STOCK EXCHANGE.

2.7           ANNUAL REPORT; FINANCIAL STATEMENTS.  EXCEPT AS QUALIFIED BY
SCHEDULE 2.7, THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2006 (INCLUDING ALL EXHIBITS AND SCHEDULES THERETO, THE “SEC
REPORT”) HAS BEEN FILED WITH THE SEC AND THE SEC REPORT COMPLIED IN ALL MATERIAL
RESPECTS WITH THE RULES OF THE SEC APPLICABLE TO SUCH SEC REPORT ON THE DATE
FILED WITH THE SEC, AND THE SEC REPORT DID NOT CONTAIN, ON THE DATE OF FILING
WITH THE SEC, AND DOES NOT CONTAIN AS OF THE DATE HEREOF, AND THE SEC REPORT
WILL NOT CONTAIN AS OF THE CLOSING DATE, ANY UNTRUE STATEMENT OF A MATERIAL
FACT, OR OMIT TO STATE ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS
THEREIN, IN LIGHT OF THE CIRCUMSTANCES IN WHICH THEY WERE MADE, NOT
MISLEADING.   AS OF THE DATE HEREOF, EXCEPT AS SET FORTH IN SCHEDULE 2.7, THE
SEC REPORT HAS NOT BEEN AMENDED.  EXCEPT AS QUALIFIED BY SCHEDULE 2.7, ALL OF
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE SEC REPORT (THE “COMPANY
FINANCIAL STATEMENTS”):  (I) HAVE BEEN PREPARED FROM AND ON THE BASIS OF, AND
ARE IN ACCORDANCE WITH, THE BOOKS AND RECORDS OF THE COMPANY AND WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH PRIOR
ACCOUNTING PERIODS; (II) FAIRLY AND ACCURATELY PRESENT IN ALL MATERIAL RESPECTS
THE CONSOLIDATED FINANCIAL CONDITION OF THE COMPANY AS OF THE DATE OF EACH SUCH
COMPANY FINANCIAL STATEMENT AND THE RESULTS OF ITS OPERATIONS FOR THE PERIODS
THEREIN SPECIFIED; AND (III) IN THE CASE OF THE ANNUAL FINANCIAL STATEMENTS, ARE
ACCOMPANIED BY THE AUDIT OPINION OF THE COMPANY’S INDEPENDENT PUBLIC
ACCOUNTANTS.  EXCEPT AS SET FORTH IN SCHEDULE 2.7 OR IN THE COMPANY FINANCIAL
STATEMENTS, AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE, THE COMPANY HAS NO
LIABILITIES OTHER THAN (I) LIABILITIES WHICH ARE REFLECTED OR RESERVED AGAINST
IN THE COMPANY FINANCIAL STATEMENTS AND WHICH REMAIN OUTSTANDING AND
UNDISCHARGED AS OF THE DATE HEREOF, (II) LIABILITIES ARISING IN THE ORDINARY
COURSE OF BUSINESS OF THE COMPANY SINCE DECEMBER 31, 2006, OR (III) LIABILITIES
WHICH WERE NOT REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO BE
REFLECTED OR RESERVED ON THE COMPANY FINANCIAL STATEMENTS.  SINCE DECEMBER 31,
2006, EXCEPT AS SET FORTH ON SCHEDULE 2.7 HERETO, THERE HAS NOT BEEN ANY EVENT
OR CHANGE WHICH HAS HAD OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT AND THE COMPANY HAS NO KNOWLEDGE OF ANY EVENT OR CIRCUMSTANCE
THAT WOULD REASONABLY BE EXPECTED TO RESULT IN SUCH A MATERIAL ADVERSE EFFECT.

2.8           Absence of Certain Changes.  Since December 31, 2006 (the “Balance
Sheet Date”), except as set forth on Schedule 2.7 hereto, and in the SEC Report,
neither the Company nor any of its Subsidiaries has:

(a) redeemed, purchased or otherwise acquired directly or indirectly any shares
of any class or series of its capital stock, or any instrument or security which
consists of or includes a right to acquire such shares (other than repurchases
of restricted stock at cost required

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pursuant to agreements outstanding on the date of this Agreement or entered into
after the date of this Agreement in compliance with the provisions hereof);

(b) paid, discharged or satisfied any claim, liability or obligation (whether
absolute, accrued, contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities and obligations reflected or reserved against in the
Company Balance Sheet in the SEC Report or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date;

(c) permitted or allowed any of its material properties or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, claim, lien, security interest, encumbrance, restriction or charge of
any kind outside of the ordinary course of business;

(d) cancelled any debt or waived any claim or right of substantial value;

(e) sold, transferred, licensed, leased, pledged, mortgaged or otherwise
disposed of any of its material properties or assets (real, personal or mixed,
tangible or intangible) or any material amount of property or assets, except in
the ordinary course of business;

(f) disposed of or permitted to lapse any right to the use of any Proprietary
Rights (as defined in Section 2.14 hereof), or disposed of or disclosed to any
person or entity, other than representatives of the Investors and persons
subject to a nondisclosure agreement, any trade secret, formula, process,
know-how or other Proprietary Right not yet a matter of public knowledge;

(g) granted any material increase or accrual in or accelerated, any benefit or
compensation payable or to become payable to any officer, director, employee or
consultant, including any such increase, accrual or acceleration pursuant to any
benefit plan except in connection with a promotion or job change or any general
increase in the compensation payable or to become payable to officers, employees
or directors in the ordinary course of business, or entered into or amended in
any material way any employment, material consulting, severance, termination or
material benefit plan agreement or arrangement other than in the ordinary course
of business;

(h) declared, paid or set aside for payment any dividend or other distribution
in respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of the
Company or any of its Subsidiaries;

(i) made any change in any method of tax or financial statement accounting or
accounting practice that would or would reasonably be expected to result in any
material change in the Company Financial Statements;

(j) paid, loaned or advanced any amount to, or sold, transferred or leased any
material properties or assets (real, personal or mixed, tangible or intangible)
to, or entered into any

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agreement or arrangement with, any of its officers or directors or employees or
any Affiliate (as defined in Section 7.1) of any of its officers or directors or
employees, except for directors’ fees and compensation to officers in the
ordinary course of business;

(k) amended its certificate of incorporation or by-laws or similar
organizational documents;

(l) issued, sold, transferred, pledged, disposed of or encumbered any shares of
any class or series of its capital stock, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of any class or series of its capital stock, other than
shares of Common Stock reserved for issuance on the date of this Agreement
pursuant to the Company’s 2005 Long-Term Incentive Compensation Plan, the
exercise of any warrants or options to purchase Common Stock described on
Schedule 2.6 or existing agreements that require the Company to issue shares of
Common Stock;

(m) terminated or materially modified or amended any of its material contracts
or waived, released or assigned any material rights under any material contract
or claims, except in the ordinary course of business and consistent with past
practice;

(n) revalued in any material respect any of its assets, including writing down
the value of inventory or writing-off notes or accounts receivable, other than
in the ordinary course of business consistent with past practice or as required
by GAAP;

(o) adopted a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries; or

(p) agreed, whether in writing or otherwise, to take any action described in
this section.

2.9           INCOME TAX RETURNS.  EXCEPT AS SET FORTH ON SCHEDULE 2.9, THE
COMPANY AND THE SUBSIDIARIES HAVE FILED ALL FEDERAL AND STATE INCOME TAX RETURNS
WHICH ARE REQUIRED TO BE FILED, AND HAVE PAID, OR MADE PROVISION FOR THE PAYMENT
OF, ALL TAXES WHICH HAVE BECOME DUE PURSUANT TO SAID RETURNS OR PURSUANT TO ANY
ASSESSMENT RECEIVED BY THE COMPANY OR ANY SUBSIDIARY, EXCEPT SUCH TAXES, IF ANY,
AS ARE BEING CONTESTED IN GOOD FAITH AND AS TO WHICH ADEQUATE RESERVES HAVE BEEN
PROVIDED.  THE COMPANY HAS NO KNOWLEDGE OF ANY PENDING ASSESSMENTS OR
ADJUSTMENTS OF THE INCOME TAX PAYABLE OF THE COMPANY OR ITS SUBSIDIARIES WITH
RESPECT TO ANY YEAR.

2.10         PERMITS; COMPLIANCE WITH LAW.  THE COMPANY AND EACH SUBSIDIARY
POSSESSES, AND WILL HEREAFTER POSSESS, ALL PERMITS, CONSENTS, APPROVALS,
FRANCHISES AND LICENSES REQUIRED AND RIGHTS TO ALL TRADEMARKS, TRADE NAMES,
PATENTS, AND FICTITIOUS NAMES, IF ANY, NECESSARY TO ENABLE THEM TO CONDUCT THE
BUSINESS IN WHICH IT IS NOW ENGAGED IN COMPLIANCE WITH APPLICABLE LAW, EXCEPT
WHERE FAILURE TO DO SO WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  THE COMPANY
AND EACH SUBSIDIARY ARE IN COMPLIANCE WITH ALL FEDERAL, STATE AND LOCAL LAWS,
REGULATIONS AND ORDINANCES (“REQUIREMENTS OF LAW”) IN THE CONDUCT OF ITS
BUSINESS AND

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CORPORATE AFFAIRS, EXCEPT WHERE FAILURE TO COMPLY, SINGLY OR IN THE AGGREGATE,
WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.

2.11         ERISA.  EXCEPT AS SET FORTH ON SCHEDULE 2.11, THE COMPANY AND EACH
SUBSIDIARY IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ANY APPLICABLE
PROVISIONS OF ERISA; THE COMPANY AND EACH SUBSIDIARY HAS NOT VIOLATED ANY
PROVISION OF ANY PLAN MAINTAINED OR CONTRIBUTED TO BY IT; NO REPORTABLE EVENT AS
DEFINED IN ERISA HAS OCCURRED AND IS CONTINUING WITH RESPECT TO ANY EMPLOYEE
BENEFIT PLAN (“PLAN”) INITIATED BY THE COMPANY OR ANY SUBSIDIARY; THE COMPANY
AND EACH SUBSIDIARY HAS MET ITS MINIMUM FUNDING REQUIREMENTS UNDER ERISA WITH
RESPECT TO ANY PLAN; AND ANY PLAN WILL BE ABLE TO FULFILL ITS BENEFIT
OBLIGATIONS AS THEY COME DUE IN ACCORDANCE WITH THE PLAN DOCUMENTS AND UNDER
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.  SCHEDULE 2.11 DESCRIBES EACH PLAN
MAINTAINED BY THE COMPANY AND EACH OF ITS SUBSIDIARIES.

2.12         CONTRACTS.  SCHEDULE 2.12 SETS FORTH A DESCRIPTION OF EACH
CONTRACTUAL OBLIGATION NOT FILED AS AN EXHIBIT TO THE SEC REPORT THAT PROVIDES
FOR PAYMENTS TO OR BY THE COMPANY OR ANY SUBSIDIARY IN EXCESS OF $500,000, OR IS
OTHERWISE MATERIAL TO THE OPERATIONS OF THE COMPANY OR ANY SUBSIDIARY.  EXCEPT
AS SET FORTH ON SCHEDULE 2.4, NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN
DEFAULT ON ANY CONTRACTUAL OBLIGATION, EXCEPT FOR SUCH DEFAULTS WHICH WOULD NOT
HAVE A MATERIAL ADVERSE EFFECT.

2.13         ENVIRONMENTAL MATTERS.  EXCEPT AS SET FORTH ON SCHEDULE 2.13, SINCE
SEPTEMBER 10, 2004, THE COMPANY AND ITS SUBSIDIARIES (INCLUDING THE
SUBSIDIARIES) HAVE AT ALL TIMES BEEN IN COMPLIANCE WITH ALL ENVIRONMENTAL LAWS
AND REGULATIONS APPLICABLE TO THE COMPANY’S CURRENT BUSINESS EXCEPT WHERE THE
FAILURE TO SO COMPLY WOULD NOT CAUSE A MATERIAL ADVERSE EFFECT.  EXCEPT AS
DESCRIBED IN THE SEC REPORT OR AS SET FORTH ON SCHEDULE 2.13, TO THE COMPANY’S
KNOWLEDGE NONE OF THE OPERATIONS OF THE COMPANY OR ANY SUBSIDIARY IS THE SUBJECT
OF ANY FEDERAL OR STATE INVESTIGATION EVALUATING WHETHER ANY REMEDIAL ACTION
INVOLVING A MATERIAL EXPENDITURE IS NEEDED TO RESPOND TO A RELEASE OF ANY TOXIC
OR HAZARDOUS WASTE OR SUBSTANCE INTO THE ENVIRONMENT.  EXCEPT AS SET FORTH ON
SCHEDULE 2.13, NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS RECEIVED NOTICE OF ANY
ACTUAL OR THREATENED CLAIM, INVESTIGATION, PROCEEDING, ORDER OR DECREE IN
CONNECTION WITH ANY RELEASE OF ANY TOXIC OR HAZARDOUS WASTE OR SUBSTANCE INTO
THE ENVIRONMENT.

2.14         TRADEMARKS, ETC.  THE COMPANY AND THE SUBSIDIARIES OWN, HAVE
SUFFICIENT TITLE TO, OR HAVE THE RIGHT TO USE (OR CAN OBTAIN THE RIGHT TO USE ON
REASONABLE COMMERCIAL TERMS), ALL PATENTS, TRADEMARKS, SERVICE MARKS, TRADE
NAMES, COPYRIGHTS, LICENSES, TRADE SECRETS OR OTHER PROPRIETARY RIGHTS
(COLLECTIVELY, THE “PROPRIETARY RIGHTS”) NECESSARY TO THEIR BUSINESS AS NOW
CONDUCTED WITHOUT INFRINGING UPON THE RIGHT OF ANY PERSON.  EXCEPT FOR EMPLOYEE
CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES AND CONSULTANTS, THERE ARE NO
OUTSTANDING MATERIAL OPTIONS, LICENSES OR AGREEMENTS RELATING TO INTELLECTUAL
PROPERTY RIGHTS OF THE COMPANY OR ANY SUBSIDIARY NECESSARY TO THEIR BUSINESS AS
NOW CONDUCTED, NOR IS THE COMPANY OR ANY SUBSIDIARY BOUND BY OR A PARTY TO ANY
MATERIAL OPTIONS, LICENSES OR AGREEMENTS WITH RESPECT TO THE PROPRIETARY RIGHTS
OF ANY OTHER PERSON OR ENTITY.  TO THE COMPANY’S KNOWLEDGE, NEITHER THE COMPANY
NOR ANY SUBSIDIARY HAS VIOLATED OR IS IN CURRENT VIOLATION OF, AND NEITHER THE
COMPANY NOR ANY SUBSIDIARY HAS RECEIVED ANY COMMUNICATIONS ALLEGING THAT THE
COMPANY OR ANY SUBSIDIARY HAS VIOLATED OR, BY CONDUCTING ITS BUSINESS AS
PROPOSED, WOULD VIOLATE, ANY OF

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THE PROPRIETARY RIGHTS OF ANY OTHER PERSON OR ENTITY.  THE COMPANY AND THE
SUBSIDIARIES ARE NOT AWARE OF ANY MATERIAL VIOLATION BY A THIRD PARTY OF ANY OF
THEIR PROPRIETARY RIGHTS NECESSARY TO THEIR BUSINESS AS NOW CONDUCTED.

2.15         EMPLOYEES.  EXCEPT AS SET FORTH ON SCHEDULE 2.15, ALL EMPLOYEES OF
THE COMPANY AND EACH SUBSIDIARY ARE EMPLOYED “AT WILL” AND MAY BE TERMINATED
WITHOUT PAYMENT OF SEVERANCE OR INCURRENCE OF ANY OTHER LIABILITY OF THE COMPANY
OR THE SUBSIDIARIES; NO EMPLOYEE OF THE COMPANY IS IN VIOLATION OF ANY MATERIAL
TERM OF ANY EMPLOYMENT CONTRACT, CONFIDENTIALITY AGREEMENT OR ANY OTHER MATERIAL
CONTRACTUAL OBLIGATION RELATING TO THE RIGHT OF ANY SUCH EMPLOYEE TO BE EMPLOYED
BY THE COMPANY OR ANY SUBSIDIARY; AND NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS
ANY EMPLOYEE SEVERANCE AGREEMENT COVERING ANY OF ITS EMPLOYEES.  THERE ARE NO
LABOR DISPUTES OR UNION ORGANIZATION ACTIVITIES PENDING OR THREATENED BETWEEN
THE COMPANY OR THE SUBSIDIARIES AND THEIR EMPLOYEES.

2.16         TITLE TO PROPERTIES.  THE ASSETS OWNED OR LEASED BY THE COMPANY AND
ITS SUBSIDIARIES ARE ALL OF THE ASSETS NECESSARY TO CONDUCT THE BUSINESS OF THE
COMPANY AND ITS SUBSIDIARIES AS CURRENTLY BEING CONDUCTED.  THE COMPANY AND ITS
SUBSIDIARIES HAVE GOOD AND MARKETABLE TITLE TO ALL OF THE ASSETS THEY OWN, REAL
AND PERSONAL, MOVABLE AND IMMOVABLE, TANGIBLE AND INTANGIBLE, FREE AND CLEAR OF
ANY CHARGE, CLAIM, LIEN, PLEDGE, SECURITY INTEREST OR OTHER ENCUMBRANCE, EXCEPT
FOR: (A) LIENS FOR TAXES NOT YET DUE AND PAYABLE, (B) ENCUMBRANCES DESCRIBED ON
SCHEDULE 2.16 HERETO, OR (C) MINOR IMPERFECTIONS OF TITLE AND ENCUMBRANCES, IF
ANY, WHICH (I) ARE NOT SUBSTANTIAL IN AMOUNT, (II) DO NOT DETRACT FROM THE VALUE
OF THE PROPERTY SUBJECT THERETO, IMPAIR THE OPERATIONS OF THE BUSINESS OF THE
COMPANY, OR THE USE OR LICENSE OF CERTAIN OF THE ASSETS OF THE COMPANY, AND
(III) HAVE ARISEN IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST
PRACTICE.

2.17         RELATED PARTY TRANSACTIONS.  EXCEPT FOR THIS AGREEMENT AND THOSE
CONTRACTS DESCRIBED IN THE SEC REPORT OR ON SCHEDULE 2.17 HERETO, NO EXISTING
CONTRACTUAL OBLIGATION OF THE COMPANY OR ITS SUBSIDIARIES IS WITH OR FOR THE
DIRECT BENEFIT OF (I) ANY PARTY OWNING, OR FORMERLY OWNING, BENEFICIALLY OR OF
RECORD, DIRECTLY OR INDIRECTLY, IN EXCESS OF FIVE PERCENT (5%) OF THE
OUTSTANDING CAPITAL STOCK OF THE COMPANY, (II) ANY DIRECTOR, OFFICER OR SIMILAR
REPRESENTATIVE OF THE COMPANY, (III) ANY NATURAL PERSON RELATED BY BLOOD,
ADOPTION OR MARRIAGE TO ANY PARTY DESCRIBED IN (I) OR (II), OR (III) ANY ENTITY
IN WHICH ANY OF THE FOREGOING PARTIES HAS, DIRECTLY OR INDIRECTLY, AT LEAST A
FIVE PERCENT (5%) BENEFICIAL INTEREST (A “RELATED PARTY”).  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, NO RELATED PARTY, DIRECTLY OR INDIRECTLY, OWNS OR
CONTROLS ANY MATERIAL ASSETS OR MATERIAL PROPERTIES WHICH ARE USED IN THE
COMPANY’S BUSINESS AND TO THE ACTUAL KNOWLEDGE OF THE COMPANY, NO RELATED PARTY,
DIRECTLY OR INDIRECTLY, ENGAGES IN OR HAS ANY SIGNIFICANT INTEREST IN OR
CONNECTION WITH ANY BUSINESS WHICH IS, OR HAS BEEN WITHIN THE LAST TWO YEARS, A
COMPETITOR, CUSTOMER OR SUPPLIER OF THE COMPANY OR HAS DONE BUSINESS WITH THE
COMPANY OR WHICH CURRENTLY SELLS OR PROVIDES PRODUCTS OR SERVICES WHICH ARE
SIMILAR OR RELATED TO THE PRODUCTS OR SERVICES SOLD OR PROVIDED IN CONNECTION
WITH THE BUSINESS.

2.18         BROKERS.  THE COMPANY WILL PAY MORGAN KEEGAN & COMPANY, INC. (THE
“FINANCIAL ADVISOR”), CONTINGENT UPON THE SUCCESSFUL CLOSING OF A STRATEGIC
TRANSACTION

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(INCLUDING THE PRIVATE PLACEMENT COVERED BY THIS AGREEMENT), AN ADVISORY FEE, IN
CASH AT CLOSING EQUAL TO 2% OF THE GROSS PROCEEDS DELIVERED TO THE COMPANY AT
SUCH CLOSING.

2.19         SECURITIES LAW MATTERS.  EXCEPT AS SET FORTH ON SCHEDULE 2.7, SINCE
JANUARY 1, 2005, THE COMPANY HAS FILED ALL REPORTS, REGISTRATION STATEMENTS,
PROXY STATEMENTS AND OTHER MATERIALS (INCLUDING ANY EXHIBITS AND SCHEDULES),
TOGETHER WITH ANY AMENDMENTS REQUIRED TO BE MADE WITH RESPECT THERETO, THAT WERE
REQUIRED TO BE FILED WITH (I) THE SEC UNDER THE SECURITIES ACT, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”), AND (II) ANY
APPLICABLE STATE SECURITIES AUTHORITIES.  SUBJECT TO THE ACCURACY OF THE
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS SET FORTH IN SECTION 3, THE
OFFER, SALE AND ISSUANCE OF THE SHARES TO THE INVESTORS WILL BE EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT.

2.20         NO ANTI-DILUTION RIGHTS.  EXCEPT AS SET FORTH ON SCHEDULE 2.20, THE
TRANSACTIONS CONTEMPLATED HEREBY WILL NOT TRIGGER ANY ANTI-DILUTION PROVISIONS
CONTAINED IN ANY EXISTING AGREEMENTS.

2.21         FULL DISCLOSURE.  NO REPRESENTATION, WARRANTY, SCHEDULE OR
CERTIFICATE OF THE COMPANY MADE OR DELIVERED PURSUANT TO THIS AGREEMENT CONTAINS
OR WILL CONTAIN ANY UNTRUE STATEMENT OF FACT, OR OMITS OR WILL OMIT TO STATE A
MATERIAL FACT THE ABSENCE OF WHICH MAKES SUCH REPRESENTATION, WARRANTY OR OTHER
STATEMENT MISLEADING, WHERE SUCH MISSTATEMENT OR OMISSION WOULD RESULT IN A
MATERIAL ADVERSE EFFECT.

2.22         Internal Accounting and Disclosure Controls.  The Company and its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-14 under the Exchange Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the
Commission, including, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company’s management, including its principal executive officer or
officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure.  Except as disclosed in
the SEC Report, since December 31, 2006, neither the Company nor any of its
Subsidiaries have received any notice or correspondence from any accountant
relating to any material weakness in any part of the system of internal
accounting controls of the Company or any of its Subsidiaries.

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2.23         No Integrated Offering.  None of the Company, its Subsidiaries, any
of their Affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the Securities Act, whether through
integration with prior offerings or otherwise.  None of the Company, its
Subsidiaries, their affiliates and any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of the issuance of any of the Securities under the Securities Act
or cause the offering of the Securities to be integrated with other offerings
for purposes of any such applicable stockholder approval provisions.

2.24         Manipulation of Price.  The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Shares, (ii) other than the Financial Advisor, sold, bid for, purchased, or paid
any compensation for soliciting purchases of, any of the Securities, or (iii)
other than the Financial Advisor, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.

2.25         Disclosure.  Neither the Company nor any other Person acting on its
behalf has provided any of the Investors or their respective agents or counsel
with any information that constitutes material non-public information other than
concerning the transactions contemplated by this Agreement or disclosed pursuant
to a non-disclosure agreement.  The Company acknowledges that the Purchaser will
rely on the foregoing representations in effecting transactions in securities of
the Company.

3.             Representations and Warranties of Investors.  Each Investor,
severally and not jointly, hereby makes the following representations and
warranties as to such Investor:

3.1           Organization.  Investor, if not a natural person, is duly
organized and validly existing and in good standing under the laws of the state
of its organization.

3.2           Authority.   Investor has the corporate or other authority to
execute and deliver this Agreement and the Questionnaire to which such Investor
is a party and to perform its obligations hereunder.

3.3           No Violation.  The execution and the delivery by Investor of this
Agreement and the Questionnaire, and its purchase of the Shares and the
consummation of the transactions contemplated hereby or to be effected
concurrently herewith do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default
under, (c) result in a violation of, or (d) require any authorization, consent
or approval not heretofore obtained pursuant to, any Contractual Obligation or
Requirement of Law to which Investor is a party or is otherwise subject.

3.4           Enforceability.  This Agreement and the Questionnaire constitute
the legal, valid and binding obligation of Investor and is enforceable against
Investor in accordance

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with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect generally relating to or affecting
creditors’ rights.

3.5           Investment Intent.  Investor is acquiring the Shares for its own
account for investment and not with a view to, or for resale in connection with,
any “distribution” thereof for purposes of the Securities Act.  Investor is an
“accredited investor” as such term is defined in Regulation D under the
Securities Act.  Investor acknowledges that the Shares shall be “restricted
securities” within the meaning of Rule 144 (“Rule 144”) under the Securities
Act, will contain a transfer restriction legend and may only be resold pursuant
to an effective registration statement filed with the SEC under the Securities
Act, or pursuant to Rule 144 or another valid exemption from the registration
requirements of the Act as established by an opinion of counsel reasonably
acceptable to the Company.

3.6           Investigation.  Investor acknowledges that he has been given full
access by the Company to all information concerning the business and financial
condition, properties, operations and prospects of the Company that Investor has
deemed relevant for purposes of making the investment contemplated by this
Agreement.  By reason of Investor’s knowledge and experience in financial and
business matters in general, the business of the Company and investments of the
type contemplated by this Agreement in particular, Investor is capable of
evaluating the merits and risks of making the investment in the Shares and is
able to bear the economic risk of the investment (including a complete loss of
its investment in the Shares).  Subject to the truth and accuracy of the
representations and warranties made by the Company hereunder, Investor has
conducted such investigation as it deems relevant in connection with its
consummation of the transactions contemplated by this Agreement.

3.7           Brokers.  Investor has not agreed to pay or incurred any
obligation in respect of any finder’s fee, brokerage fee or other commission in
connection with the sale of Shares contemplated by this Agreement.

3.8           Trading Activities.  Neither the Investor nor any person acting on
its behalf or at its direction has engaged in any purchase or sale of Common
Stock (including without limitation any short sale, pledge, transfer, establish
an open “put equivalent position” within the meaning of Rule 16a-1(h) under the
Exchange Act) after learning about the transaction contemplated hereby.

4.             Conditions to the Obligations of the Company.  The obligations of
the Company to consummate the transactions contemplated by this Agreement on the
Closing Date shall be subject to the satisfaction of each of the conditions set
forth in this Section 4, unless waived by the Company, on or prior to the
Closing Date.

4.1           Representations and Warranties.  If this Agreement is not signed
on the Closing Date, the representations and warranties of the Investors set
forth in Section 3 shall be true and correct in all material respects as of the
Closing Date as though made on and as of such date.

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4.2           No Proceedings.  No order, injunction, decree or other action or
legal, administrative, arbitration or other proceeding by any person other than
the Company or investigation by any governmental agency or authority shall be
pending or threatened, challenging or imposing a material limitation on the
execution, delivery or performance of this Agreement, or the consummation of any
of the transactions contemplated hereby.

4.3           Compliance with Laws.  The purchase of the Shares by each Investor
hereunder shall be legally permitted by all laws and regulations to which each
Investor or the Company is subject.

4.4           Approval of Documents.  All proceedings taken in connection with
the transactions contemplated hereby and all documents incident to such
transactions shall be reasonably satisfactory in form and substance to the
Company and its counsel.

4.5           Questionnaire.  Each investor shall have completed and executed
and delivered to the Company a Questionnaire in a manner reasonably acceptable
to the Company.

5.             Conditions to the Obligations of Investors.  The obligations of
each Investor to consummate the transactions under this Agreement on the Closing
Date shall be subject to the satisfaction of each of the conditions set forth in
this Section 5, unless waived by each Investor, on or prior to the Closing Date.

5.1           Representations and Warranties.   If this Agreement is not signed
on the Closing Date, the representations and warranties of the Company set forth
in Section 2 shall be true and correct in all material respects as of the
Closing Date as though made on and as of such date; the Company shall have
performed all obligations and complied with all covenants required to be
performed or complied with by the Company under this Agreement on or prior to
the Closing Date; and each Investor shall have received on the Closing Date from
the Company a certificate or certificates, dated the Closing Date, to such
effect, which certificate or certificates shall be signed by an authorized
officer of the Company.

5.2           No Proceedings.  No order, injunction, decree or other action or
legal, administrative, arbitration or other proceeding by any person or
investigation by any governmental agency or authority shall be pending or, to
the knowledge of the Company, threatened, challenging or imposing a material
limitation on the execution, delivery or performance of this Agreement, the
consummation of any of the transactions contemplated thereby or the operation by
the Company of its businesses as now conducted.

5.3           Approval of Documents.  All proceedings taken in connection with
the transactions contemplated hereby and all documents incident to such
transactions shall be reasonably satisfactory in form and substance to each
Investor and its counsel.

5.4           Compliance with Laws.  The purchase of the Shares by each Investor
hereunder shall be legally permitted by all laws and regulations to which each
Investor or the Company is subject.

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5.5           No Material Adverse Change.  Except as described in the SEC
Reports or in Schedule 2.7, there shall have been no event that has had or could
reasonably be expected to result in a Material Adverse Effect since December 31,
2006.

5.6           Opinion of Counsel.  Investor shall have received an opinion of
counsel to the Company in substantially the form attached as Schedule 5.6
hereto.

6.             Certain Covenants of the Company.

6.1           LISTING OF COMMON STOCK.  THE COMPANY SHALL USE ITS REASONABLE
BEST EFFORTS TO CAUSE THE COMMON STOCK TO REMAIN LISTED ON THE AMERICAN STOCK
EXCHANGE.  THE COMPANY SHALL CAUSE THE SHARES TO BE LISTED OR INCLUDED ON EACH
SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH SIMILAR SECURITIES
ISSUED BY THE COMPANY ARE THEN LISTED OR INCLUDED.

6.2           SHELF REGISTRATION.  THE COMPANY SHALL PREPARE AND FILE OR CAUSE
TO BE PREPARED AND FILED WITH THE SEC, AS SOON AS PRACTICABLE BUT IN ANY EVENT
NO LATER THAN THIRTY (30) DAYS AFTER THE CLOSING DATE (THE “FILING DEADLINE”), A
REGISTRATION STATEMENT ON FORM S-1 (OR SUCH OTHER FORM AS THE COMPANY IS THEN
ELIGIBLE TO USE) FOR AN OFFERING TO BE MADE ON A DELAYED OR CONTINUOUS BASIS
PURSUANT TO RULE 415 OF THE SECURITIES ACT REGISTERING THE RESALE FROM TIME TO
TIME BY THE INVESTORS OF THE SHARES PURSUANT TO PLANS OF DISTRIBUTION REASONABLY
ACCEPTABLE TO THE INVESTORS (THE “REGISTRATION STATEMENT”).  EACH INVESTOR
AGREES TO PROMPTLY PROVIDE TO THE COMPANY, IN WRITING, SUCH INFORMATION AS THE
COMPANY MAY REASONABLY REQUEST FOR INCLUSION IN THE REGISTRATION STATEMENT.  THE
COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO CAUSE THE REGISTRATION
STATEMENT TO BE DECLARED EFFECTIVE UNDER THE SECURITIES ACT NO LATER THAN THE
EARLIER OF (A) SIXTY (60) DAYS AFTER ITS FILING DATE OR IN THE EVENT OF SEC
REVIEW, NINETY (90) DAYS FROM THE DATE OF FILING AND (B) THE THIRD BUSINESS DAY
FOLLOWING THE DATE ON WHICH THE COMPANY IS NOTIFIED BY THE SEC THAT THE
REGISTRATION STATEMENT WILL NOT BE REVIEWED OR IS NO LONGER SUBJECT TO FURTHER
REVIEW AND COMMENTS (THE “EFFECTIVENESS DEADLINE”), UNLESS UPON THE ADVICE OF
COUNSEL IT IS ADVISABLE NOT TO ACCELERATE THE EFFECTIVENESS OF SUCH REGISTRATION
STATEMENT, FOR SUCH REASONS INCLUDING BUT NOT LIMITED TO, THE COMPANY ISSUES AN
EARNINGS RELEASE OR MATERIAL NEWS OR A MATERIAL EVENT RELATING TO THE COMPANY
OCCURS IN WHICH CASE SUCH THIRD BUSINESS DAY SHALL BE THE THIRD BUSINESS DAY
FOLLOWING THE FIFTEEN (15) CALENDAR DAY PERIOD AFTER SUCH EVENT OCCURS, AND TO
KEEP SUCH REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE UNDER THE SECURITIES ACT
UNTIL THE EARLIER OF (I) THE DATE ON WHICH ALL SHARES COVERED BY THE
REGISTRATION STATEMENT MAY BE SOLD PURSUANT TO RULE 144(K) AS DETERMINED BY THE
COUNSEL TO THE COMPANY PURSUANT TO A WRITTEN OPINION LETTER TO SUCH EFFECT,
ADDRESSED TO THE COMPANY’S TRANSFER AGENT AND TO THE INVESTORS, OR (II) SUCH
DATE AS ALL SHARES REGISTERED ON SUCH REGISTRATION STATEMENT HAVE BEEN RESOLD
(THE EARLIER TO OCCUR OF (I) OR (II) IS THE “REGISTRATION TERMINATION DATE”).

(a) If a Registration Statement ceases to be effective for any reason at any
time prior to the applicable Registration Termination Date, the Company shall
use its reasonable best efforts to reinstate the effectiveness thereof.

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(b) The Company shall supplement and amend the Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Registration Statement, if
required by the Securities Act or, to the extent to which the Company does not
reasonably object, as requested by the Investors.

(c) All Registration Expenses incurred in connection with the registrations
pursuant to this Section 6.2 shall be borne by the Company. “Registration
Expenses” shall mean all expenses incurred by the Company in complying with this
Section 6.2 hereof including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company and
Selling Expenses, as defined hereinafter).   All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the Investors.
“Selling Expenses” shall mean all brokerage and selling commissions applicable
to a sale of the Shares pursuant to the Registration Statement.

(d) The Company may suspend sales of Shares pursuant to the Registration
Statement for a period of not more than fifteen (15) days during any six (6)
month period in the event it determines in good faith that such Registration
Statement contains or may contain an untrue statement of material fact or omits
or may omit to state a material fact required to be stated therein or necessary
to make the statement therein not misleading; provided that (i) the Company
shall immediately notify the Investors of such suspension and (ii) the Company
shall promptly amend such Registration Statement in order to correct any untrue
statement and/or ensure that such Registration Statement is not misleading;
provided further that subject to the time limitations set forth above, the
Company may delay such amendment if the Company determines that such delay is in
the best interest of the Company in order to avoid premature public
announcements of potential acquisitions or other extraordinary transactions.  At
the time the Registration Statement is declared effective, each Investor shall
be named as a selling securityholder in the Registration Statement and the
related prospectus in such a manner as to permit such Investor to deliver such
prospectus to purchasers of Shares in accordance with applicable law.

(e) The Company shall promptly furnish to the Investors, upon request and
without charge, (A) any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement (but
shall redact any material non-public information therefrom), and (B) after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits.

(f) The Company shall furnish to the Investors such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Shares owned by
them.

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(g) The Company shall use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Investors, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

(h) The Company shall notify immediately each Investor holding Shares covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; provided, however, that, subject to Section 6.2(d) the Company shall
promptly amend such Registration Statement in order to correct any untrue
statement and/or ensure that such Registration Statement is not misleading.  The
Company shall immediately notify each Investor holding Shares covered by such
Registration Statement (i) when such registration statement or any
post-effective amendment thereto has become effective (ii) of any request by the
SEC or any other Federal or state governmental authority for amendments or
supplements to a registration statement or prospectus or for additional
information that pertains to the Investors as selling stockholders or the Plan
of Distribution; (iii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Shares
or the initiation of any proceedings for that purpose, including pursuant to
Section 8A of the Securities Act; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; (iv) of the
occurrence of any other event that results in the Investors being unable to sell
Shares pursuant to the Registration Statement or related prospectus.

(i) If the Registration Statement covering the Shares required to be filed by
the Company pursuant to this Section 6.2 is not filed with the Commission by the
date that is the Registration Statement Filing Deadline, then the Company shall
make the payments to the Investors as provided in the next sentence as
liquidated damages and not as a penalty.  If the Registration Statement covering
the Shares required to be filed by the Company pursuant to this Section 6.2 is
not filed with the Commission by the date that is the Registration Statement
Filing Deadline, a one-time amount equal to three percent (3%) of the purchase
price for the Shares shall be paid by the Company to the Investors.

(j) If the Registration Statement covering the Shares required to be filed by
the Company pursuant to this Section 6.2 is not declared effective by the
Commission by the date that is the Effectiveness Deadline (an “Initial Date”)
then the Company shall make the payments to the Investors as provided in the
next sentence as liquidated damages and not as a penalty.  If the Registration
Statement covering the Shares required to be filed by the Company pursuant to
this Section 6.2 is not declared effective by the date that is the Effectiveness
Deadline, an amount equal to two percent (2%) (the “Liquidated Damage Rate”) of
the purchase price for the Shares shall be

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paid by the Company to the Investors, and an additional amount equal to two
percent (2%) of the purchase price for the Shares shall be paid by the Company
to the Investors in respect of any Computation Date thereafter.  The amount to
be paid by the Company to the Investors pursuant to this Section 6.2(j) shall
begin accruing as of the Effectiveness Deadline (“Initial Date”) and shall be
determined and paid as of each Computation Date (as defined below) and for each
thirty (30)-day period of any subsequent Computation Dates thereafter,
calculated on a pro rata basis to the date on which the Registration Statement
is declared effective by the Commission, (the “Periodic Amount”).  However,
payments pursuant to this Section 6.2(j) are subject to a cap of ten percent
(10%) or five (5) thirty (30)-day periods.

(k) If the Registration Statement covering the Shares required to be filed by
the Company pursuant to this Section 6.2 is not declared effective by the
Commission by the date that is thirty (30) days after the date of the fifth
(5th), thirty (30) day period (as defined in Section 6.2 (j) above), then the
Company shall make an additional one-time payment to the Investors equal to five
percent (5%) of the purchase price for the Shares.

(l) If the Company suspends sales of Shares pursuant to the Registration
Statement for a period of thirty (30) days during any six (6) month period, or
forty-five (45) days during any six (6) month period if the Company is required
to file a post-effective amendment to the Registration Statement to update the
prospectus included therein under applicable SEC rules and regulations, an
amount equal to one percent (1%) of the purchase price for the Shares shall be
paid by the Company to the Investors, and an additional amount equal to one
percent (1%) of the purchase price for the Shares shall be paid by the Company
to the Investors if such suspension lasts an additional 30 days, or in respect
of any subsequent suspension period of thirty (30) days during any six (6) month
period.

(m) The amounts payable under sections 6.2 (i),(j) (k) or (l) above shall be
paid by the Company to the Investors, pro rata, at the option and sole
discretion of each Investor, by (i) wire transfer of immediately available funds
within five (5) business days after the Filing Deadline and each Computation
Date or each date triggering payment pursuant to Section 6.2(l), as the case may
be (each a “Measurement Date”), or (ii) by the issuance of additional Common
Stock; the number of shares to be issued shall be calculated as the Periodic
Amount to which each investor is entitled for each thirty (30)-day computation
period, divided by the lesser of (a) five dollars and twenty-five cents ($5.25)
per share and (b) the closing price of the Common Stock as of the applicable
Measurement Date, provided that such price shall never be below three dollars
and fifty cents ($3.50).

As used in this Section 6.2, “Computation Date” means the date that is thirty
(30) days after the Initial Date and, if the Registration Statement to be filed
by the Company pursuant to this Section 6.2 has not theretofore been filed with
the Commission or declared effective by the Commission, as the case may be, each
date which is thirty (30) days after the previous Computation Date until such
Registration Statement is so filed or declared effective, or until the
liquidated damages limit has been reached, as the case may be.  Notwithstanding
the above, if the Registration Statement covering the Shares required to be
filed by the Company pursuant to this Section 6.2 is not filed with the
Commission by the Registration Statement Filing Deadline, the Company shall be
in default of the terms of this Section 6.2, and the Investors shall be entitled
to damages as set forth above.

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6.3           Termination of Registration Rights. All rights and obligations
provided for in Section 6.2 shall terminate on the date on which the Company has
no obligation to maintain the effectiveness of the Registration Statement;
provided that the rights of any Investor under Section 6.2 shall terminate the
earlier of (i) the date on which all Shares covered by the Registration
Statement may be sold pursuant to Rule 144(k) as determined by the counsel to
the Company pursuant to a written opinion letter to such effect, addressed to
the Company’s transfer agent and to the Investors, or (ii) such date as all
Shares registered on such Registration Statement have been resold.

6.4           Reports Under Securities Exchange Act of 1934. With a view to
making available to the Investors the benefits of Rule 144 promulgated under the
Securities Act (“SEC Rule 144”) and any other rule or regulation of the SEC that
may at any time permit Investors to sell securities of the Company to the public
without registration or pursuant to a Registration Statement, the Company agrees
to:

(a) use its reasonable best efforts to make and keep public information
available, as those terms are understood and defined in SEC Rule 144, at all
times so long as the Company remains subject to the periodic reporting
requirements under Sections 13 or 15(d) of the Exchange Act;

(b) use its reasonable best efforts to take such action as is necessary to
enable the Investors to utilize Form S-1 or such other registration statement
form as may be applicable for the sale of their Shares;

(c) use its reasonable best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and

(d) furnish to any Investor, so long as the Investor owns any Shares, forthwith
upon request (i) a written statement by the Company that it has complied with
the reporting requirements of the Securities Act and the Exchange Act, or that
it qualifies as a registrant whose securities may be resold pursuant to Form S-1
(or such other form as the Company is then eligible to use), (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Investor of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.

6.5           Lock-up of Merger Related Earn-out Shares. Under the terms of the
Merger Agreement with Navidec, Inc. (September 10, 2004), the Company committed
to issue various tranches of 9,000,000 shares to the former shareholders of
BPZ-Texas on a contingent earn-out basis if the Company achieves certain
production goals. The remaining tranche of 9,000,000 earn-out shares are
issuable once the Company is entitled to receive as its proportionate share from
gross production from any oil and gas wells owned or operated by the Company not
less than 2,000 barrels of oil per day or its equivalent (approximately 12
million cubic feet of gas per day) prior to December 28, 2007.  The Company
hereby agrees

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that in the event the above referenced earn-out shares are issued, such shares
will be issued with a restrictive legend stating that the shares will be
locked-up until December 1, 2008, pursuant to the terms of this Agreement. If
the Registration Statement covering the shares required to be filed by the
Company pursuant to Section 6.2 is not declared effective by the Commission by
December 1, 2007, then the lock-up term will be extended to expire on the date
that is one year from the date that the Registration Statement covering the
shares required to be filed by the Company pursuant to Section 6.2 is declared
effective by the Commission.  Anything to the contrary notwithstanding this
lock-up, will automatically expire no later than December 28, 2009.  The Company
represents and warrants to the Investors that each of the former shareholders of
BPZ-Texas has agreed to the foregoing lock-up agreement and legend
requirements.  The foregoing lock-up agreement shall not apply to (i) bona fide
gifts, provided the recipient thereof agrees in writing with the Company to be
bound by the terms of this lock-up agreement, or (ii) dispositions to any trust
for the direct or indirect benefit of the undersigned and/or the immediate
family of any shareholder subject to this lock-up agreement, provided that such
trust agrees in writing with the Company to be bound by the terms of this
lock-up agreement.  For purposes of this paragraph, “immediate family” shall
mean any shareholder subject to this lock-up agreement and the spouse, any
lineal descendent, father, mother, brother, or sister of any shareholder subject
to this lock-up agreement.

6.6           Integration.  The Company shall not, and shall use its best
efforts to ensure that no Subsidiary or affiliate of the Company shall, sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Shares to the
Investors, or that will be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of the American Stock Exchange.

7.             Indemnification.

7.1           INDEMNIFICATION BY THE COMPANY.  THE COMPANY WILL INDEMNIFY EACH
INVESTOR, ITS OFFICERS, DIRECTORS, EMPLOYEES, PARTNERS, AFFILIATES, AGENTS,
REPRESENTATIVES AND LEGAL COUNSEL, AND EACH PERSON CONTROLLING (OR DEEMED
CONTROLLING) SUCH INVESTOR WITHIN THE MEANING OF THE SECURITIES ACT,
(COLLECTIVELY, THE “INVESTORS’ AGENTS”) AGAINST ALL CLAIMS, LOSSES, DAMAGES AND
LIABILITIES (OR ACTIONS IN RESPECT THEREOF), JOINT OR SEVERAL, ARISING OUT OF OR
BASED ON (A) (I) ANY UNTRUE STATEMENT (OR ALLEGED UNTRUE STATEMENT) OF A
MATERIAL FACT CONTAINED IN THE REGISTRATION STATEMENT, ANY PROSPECTUS, OFFERING
CIRCULAR OR OTHER SIMILAR DOCUMENT OR ANY AMENDMENTS OR SUPPLEMENTS THERETO
(INCLUDING ANY RELATED REGISTRATION STATEMENT AND AMENDMENTS OR SUPPLEMENTS
THERETO, NOTIFICATION OR THE LIKE) INCIDENT TO ANY SUCH REGISTRATION,
QUALIFICATION OR COMPLIANCE, OR BASED ON 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 IN THE LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, AND WILL REIMBURSE THE INVESTORS AND THE INVESTORS’ AGENTS
FOR ANY LEGAL OR ANY OTHER EXPENSES REASONABLY INCURRED IN CONNECTION WITH
INVESTIGATING OR DEFENDING ANY SUCH CLAIM, LOSS, DAMAGES, LIABILITY OR ACTION,
AS INCURRED, OR (II) ANY VIOLATION BY THE COMPANY OF ANY FEDERAL, STATE OR
COMMON LAW RULE OR REGULATION APPLICABLE TO THE COMPANY IN CONNECTION WITH ANY
SUCH REGISTRATION, QUALIFICATION OR COMPLIANCE, AND WILL REIMBURSE EACH
INVESTOR, AND EACH INVESTORS’ AGENTS, FOR

18

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ANY LEGAL AND ANY OTHER EXPENSES REASONABLY INCURRED IN CONNECTION WITH
INVESTIGATING OR DEFENDING ANY SUCH CLAIM, LOSS, DAMAGE, LIABILITY OR ACTION; OR
(B) ANY BREACH OF ANY COVENANT, AGREEMENT, REPRESENTATION OR WARRANTY OF THE
COMPANY IN THIS AGREEMENT.  NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL NOT
BE LIABLE UNDER THIS SECTION 7: (A) IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH
CLAIM, LOSS, DAMAGE, LIABILITY OR EXPENSE ARISES OUT OF OR IS BASED ON ANY
UNTRUE STATEMENT OR OMISSION BASED UPON WRITTEN INFORMATION FURNISHED TO THE
COMPANY BY AN INSTRUMENT DULY EXECUTED BY SUCH INVESTOR AND STATED TO BE
SPECIFICALLY FOR USE THEREIN OR FURNISHED IN WRITING BY SUCH INVESTOR TO THE
COMPANY IN RESPONSE TO A REQUEST BY THE COMPANY STATING SPECIFICALLY THAT SUCH
INFORMATION WILL BE USED BY THE COMPANY THEREIN, (B) FOR ANY AMOUNT PAID IN
SETTLEMENT OF CLAIMS WITHOUT THE COMPANY’S WRITTEN CONSENT (WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD), OR (C) TO THE EXTENT THAT IT IS FINALLY
JUDICIALLY DETERMINED THAT SUCH LIABILITIES RESULTED PRIMARILY FROM THE WILLFUL
MISCONDUCT OR BAD FAITH OF SUCH INDEMNIFIED PARTY; PROVIDED, FURTHER, THAT IF
AND TO THE EXTENT THAT SUCH INDEMNIFICATION IS HELD, BY FINAL JUDICIAL
DETERMINATION TO BE UNENFORCEABLE, IN WHOLE OR IN PART, FOR ANY REASON, THE
COMPANY SHALL MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF
SUCH INDEMNIFIED LIABILITY.  IN CONNECTION WITH THE OBLIGATION OF THE COMPANY TO
INDEMNIFY FOR EXPENSES AS SET FORTH ABOVE, IF AN INDEMNIFIED PARTY IS REIMBURSED
HEREUNDER FOR ANY EXPENSES, SUCH REIMBURSEMENT OF EXPENSES SHALL BE REFUNDED TO
THE EXTENT IT IS FINALLY JUDICIALLY DETERMINED THAT THE LIABILITIES IN QUESTION
RESULTED PRIMARILY FROM THE WILLFUL MISCONDUCT OR BAD FAITH OF SUCH INDEMNIFIED
PARTY.

7.2           INDEMNIFICATION BY INVESTORS.  EACH INVESTOR WILL SEVERALLY AND
NOT JOINTLY INDEMNIFY THE COMPANY, EACH OF ITS DIRECTORS AND OFFICERS, EACH
LEGAL COUNSEL AND INDEPENDENT ACCOUNTANT OF THE COMPANY, EACH PERSON WHO
CONTROLS THE COMPANY WITHIN THE MEANING OF THE SECURITIES ACT, ANY UNDERWRITER,
AND EACH OTHER INVESTOR, AGAINST ALL CLAIMS, LOSSES, DAMAGES AND LIABILITIES (OR
ACTIONS IN RESPECT THEREOF) ARISING OUT OF OR BASED ON (A) ANY UNTRUE STATEMENT
(OR ALLEGED UNTRUE STATEMENT) OF A MATERIAL FACT CONTAINED IN ANY SUCH
REGISTRATION STATEMENT, PROSPECTUS, OFFERING CIRCULAR OR OTHER SIMILAR DOCUMENT,
OR 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
IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, AND WILL REIMBURSE
THE COMPANY, SUCH DIRECTORS, AND OFFICERS, CONTROL PERSONS, UNDERWRITER AND EACH
OTHER INVESTOR FOR ANY LEGAL OR ANY OTHER EXPENSES REASONABLY INCURRED IN
CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH CLAIM, LOSS, DAMAGE,
LIABILITY OR ACTION, AS INCURRED, IN EACH CASE TO THE EXTENT, BUT ONLY TO THE
EXTENT, THAT SUCH UNTRUE STATEMENT (OR ALLEGED UNTRUE STATEMENT) OR OMISSION (OR
ALLEGED OMISSION) IS MADE IN SUCH REGISTRATION STATEMENT, PROSPECTUS, OFFERING
CIRCULAR OR OTHER DOCUMENT IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN
INFORMATION FURNISHED IN WRITING TO THE COMPANY BY AN INSTRUMENT DULY EXECUTED
BY SUCH INVESTOR AND STATED TO BE SPECIFICALLY FOR USE THEREIN OR FURNISHED BY
SUCH INVESTOR TO THE COMPANY IN RESPONSE TO A REQUEST BY THE COMPANY STATING
SPECIFICALLY THAT SUCH INFORMATION WILL BE USED BY THE COMPANY THEREIN; OR (B)
ANY BREACH OF ANY REPRESENTATION OR WARRANTY OF SUCH INVESTOR IN THIS
AGREEMENT.  NOTWITHSTANDING THE FOREGOING, THE INDEMNITY AGREEMENT PROVIDED IN
THIS SECTION 7 SHALL NOT APPLY TO AMOUNTS PAID IN SETTLEMENT OF ANY SUCH LOSS,
CLAIM, DAMAGE, LIABILITY OR ACTION IF SUCH SETTLEMENT IS EFFECTED WITHOUT THE
WRITTEN CONSENT OF THE INVESTOR, WHICH CONSENT SHALL NOT BE UNREASONABLY
WITHHELD. IN NO EVENT SHALL AN INVESTOR’S INDEMNIFICATION OBLIGATION EXCEED THE
NET PROCEEDS RECEIVED FROM ITS SALE OF SHARES IN SUCH OFFERING.

19

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7.3           Notification; Procedure.

(a) Each party entitled to indemnification under this Section 7 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld). The Indemnified Party may participate in such defense at
such party’s expense; provided, however, that the Indemnifying Party shall bear
the expense of such defense of the Indemnified Party if representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest. The failure of any Indemnified Party to give notice
within a reasonable period of time as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 7, but only to the
extent that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.

(b) If the indemnification provided for in this Section 7 is held to be
unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations; provided, that in no event shall any contribution by
an Investor under this Section 7 exceed the net proceeds from the offering
received by such Investor. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties’ relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.  The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(b) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
sentence.

(c) The obligations of the Company and each Investor under this Section 7 shall
survive the completion of any offering of the Shares in a Registration Statement
under this Section 7, any investigation made by or on behalf of the Indemnified
Party or any officer,

20

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director or controlling Person of such Indemnified Party and will survive the
transfer of securities.

(d) Each Investor shall furnish to the Company such information regarding such
Investor and the distribution proposed by such Investor as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
7.

7.4           REGISTRATION RIGHTS.  EACH INVESTOR AGREES THAT IF SUCH INVESTOR
WISHES TO SELL SECURITIES PURSUANT TO THE REGISTRATION STATEMENT, IT WILL DO SO
IN ACCORDANCE WITH THIS AGREEMENT.

8.             Survival of Representations and Warranties.  All representations,
warranties and agreements made by the Company and Investors in this Agreement or
in any certificate or other instrument delivered pursuant hereto shall survive
the Closing and any investigation and discovery by the Company or by Investors,
as the case may be, made at any time with respect thereto.

9.             Miscellaneous Provisions.

9.1           Deliveries.  The Company and Investors hereby covenant and agree
to use their respective reasonable best efforts to perform each of their
obligations hereunder, to deliver all certificates and to satisfy all other
conditions set forth in this Agreement and to close the transactions
contemplated by this Agreement on the Closing Date.

9.2           Successors and Assigns.  This Agreement is executed by, and shall
be binding upon and inure to the benefit of, the parties hereto and each of
their respective successors and assigns; provided, however, that neither this
Agreement nor any right pursuant hereto nor interest herein shall be assignable
except (a) by the Company with the consent of a Majority of the Investors (as
defined in Section 9.9), (b) by the Company in connection with a merger,
consolidation or sale of all or substantially all of its assets, (c) by an
Investor with the prior written consent of the Company or (d) by an Investor in
connection with a sale or other transfer of the Shares.  None of the provisions
of this Agreement shall be for the benefit of or enforceable by any other
person.

9.3           Notices.  All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:

if to the Investors at the address set forth on the signature page hereof:

if to the Company at the following address:

with a copy to:

 

 

 

 

BPZ Energy, Inc.

Adams and Reese LLP

 

580 Westlake Park Blvd., Suite 525

4400 One Houston Center

 

Houston, Texas 77079

1221 McKinney

 

Attn: Chief Executive Officer and President

Houston, Texas 77010

 

Fax: (281) 556-6377

Attn: Mark W. Coffin

 

Attn: Chief Financial Officer

Fax: (713) 652-5152

 

 

21

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All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial overnight courier service; five business days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.

9.4           Counterparts.  This Agreement may be executed in any number of
counterparts, and each such counterpart will for all purposes be deemed an
original, and all such counterparts shall constitute one and the same
instrument.

9.5           Governing Law; Forum.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts entered into and to be wholly performed therein.  Each
party to this Agreement hereby irrevocably agrees that any legal action or
proceeding arising out of or relating to this Agreement or any agreements or
transactions contemplated hereby shall be brought in the courts of the State of
Delaware or of the United States of America for the District of Delaware and
hereby expressly submits to the personal jurisdiction and venue of such courts
for the purposes thereof and expressly waives any claim of improper venue and
any claim that such courts are an inconvenient forum.  Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to the address set forth in
Section 9.3, such service to become effective 10 days after such mailing.

9.6           Attorneys’ Fees.  If any party should institute any action to
enforce or interpret any term or provision of this Agreement, the party
prevailing in such action, after all appeals have been exhausted, shall be
entitled to its attorneys’ fees, out-of-pocket disbursements and all other
expenses from the non-prevailing party in such action.

9.7           Entire Agreement.  This Agreement (together with all Exhibits and
Schedules hereto) constitutes the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous written and oral negotiations, discussions, agreements
and understandings with respect to such subject matter.

9.8           Section Headings.  The section and subsection headings contained
in this Agreement are included for convenience only and form no part of the
agreement between the parties.

9.9           Consent of Investors.  Any term or condition hereof may be waived
or amended by the consent of all Investors who have purchased the shares
hereunder. 

9.10         Interpretation.  Each of the Investors and the Company have
participated in the negotiation and drafting of this Agreement.  Accordingly,
each of the parties hereby

22

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waives any statutory provision, judicial precedent or other rule of law to the
effect that contractual ambiguities are to be construed against the party who
shall have drafted the same.

9.11         Severability.  Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement except
to the extent that any provision would clearly be contemplated by the parties to
be conditioned upon the validity and enforceability of such invalid or
prohibited provision.

9.12         Public Announcements.   On or before 8:30 a.m., New York City time,
on the first Business Day following the date of this Agreement, the Company
shall issue a press release describing the terms of the transactions
contemplated by this Agreement but not disclosing in such press release the
names of the Investors or the amount of Shares purchased by each Investor.  In
addition, on or before the end of the second Business Day following the date of
this Agreement, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by this Agreement in the form
required by the Exchange Act and attaching this Agreement as an exhibit to such
filing (the “8-K Filing”).  From and after the filing of the 8-K Filing with the
Commission, the Investors as a consequence of participating in the transactions
contemplated by this Agreement shall not be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents authorized to
disclose such information, that is not disclosed in the 8-K Filing.  The Company
shall not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide the
Investors with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing with the
Commission without the consent of the Investors.  If the Investor has, or
believes it has, received any such material, nonpublic information regarding the
Company or any of its Subsidiaries prior to the Closing Date, it shall provide
the Company with written notice thereof and the Company shall within five (5)
business days thereafter, make public disclosure of such material, nonpublic
information if permitted under applicable law or without breach or violation of
any agreement, contract or other obligation of the Company unless the Board of
Directors of the Company shall determine that such disclosure would reasonably
be expected to result in a material and adverse effect on the Company or its
business, prospects, finances or properties.  Except for such disclosure as the
Company is advised by counsel is required to be included in documents filed with
the Securities and Exchange Commission or otherwise required by law or by any
stock exchange on which the Company is listed, unless otherwise publicly
disclosed by the Company pursuant to the preceding clause or by the Investor,
the Company shall not use the name of, or make reference to, any Investor or any
of its Affiliates in any press release or in any public manner (including any
reports or filings made by the Company under the Exchange Act) without such
Investor's prior written consent which consent shall not be unreasonably
withheld.

9.13         Short Sales.  Each Investor agrees with the Company that the
Company will be irreparably harmed if the Investor engages in short sales and
similar hedging transactions.

23

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Each Investor therefore agrees that it will not directly or indirectly make or
participate in any sale of the Common Stock, including “short sales” as defined
in Rule 200 under Regulation SHO, whether or not exempt, until the effective
date of the Registration Statement covering the Shares purchased by such
Investor hereunder.  Each Investor will not use any of the restricted shares
acquired pursuant to this Agreement to cover any short position in the common
stock of the Company if doing so would be in violation of applicable securities
laws and otherwise will comply with federal securities laws in the holding and
sale of the Shares.

24

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective representatives hereunto duly authorized as of
the date first above written.

BPZ ENERGY, INC.,

 

a Colorado corporation

 

 

 

 

 

Manuel Pablo Zúñiga-Pflücker

 

President and Chief Executive Officer

 

580 Westlake Park Blvd., Suite 525

 

Houston, Texas 77079

 

 

 

 

 

INVESTOR

 

 

 

 

 

Signature

 

 

 

 

 

Name

 

 

 

 

 

Title

 

 

 

Address:

 

 

 

 

 

 

 

 

25

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Schedules to BPZ Energy, Inc.

Stock Purchase Agreement

Dated May 4, 2007

Schedule 1.1

Investors

Investor

 

Shares

 

 

 

 

 

Total Shares

 

6,670,000

 

 

1

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Schedule 2.1

Organization, etc.

Subsidiaries

1.             BPZ Energy, Inc., a Texas corporation

2.             SMC Ecuador, Inc., a Delaware corporation

3.             BPZ Marine, Inc., a Texas corporation

4.             BPZ Energy International Holdings, LP, a BVI corporation

5.             BPZ Exploracion & Produccion, SRL, a Peruvian corporation (a)

6.             Empresa Electrica Nueva Esperanza, SRL, a Peruvian corporation
(b)

7.             BPZ Energy Ecuador Cia. Ltda., an Ecuadorian corporation

Branch Offices

1.             BPZ Energy, Inc., Sucursal Peru, a registered Peruvian branch
office (a)

2.             SMC Ecuador, Inc., Sucursal, a registered Ecuadorian branch
office

Note:

The Company is in the process of setting up its Organization structure.  The
above noted companies are in various stages of establishment as of the date of
this transaction.

(a)           The Company is in the process of transforming its Peruvian branch
(BPZ Energy, Inc., Sucursal Peru) into a limited liability company (BPZ
Exploracion & Produccion, SRL) in Peru.  This company will be the E&P operating
company in Peru.

(b)           This Company will be the Power Generation operating company in
Peru.

2

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Schedule 2.2

Authority

Preemptive Rights

Under its Subscription Agreement dated December 18, 2006 with the Company,
International Finance Corporation has the right to purchase its pro rata share
of any New Securities which the Company may, from time to time, propose to sell
and issue; provided that this right does not apply to the following: (i) the
6,500,000 shares issued to International Finance Corporation pursuant to such
Subscription Agreement and any Common Stock issuable upon conversion, exercise
or exchange of Stock Equivalents issued as of December 18, 2006; (ii) Common
Stock issued or issuable in connection with any pro rata stock split or stock
dividend of the Company; (iii) Common Stock or Stock Equivalents issued pursuant
to the acquisition of any Person by the Company by merger, purchase of all or
substantially all of the assets of such Person or other transaction whereby the
Company shall become directly or indirectly the owner of more than 50% of the
voting power of such Person; or (iv) Common Stock issued or issuable under the
Company’s current Long-Term Incentive Compensation Plan, International Finance
Corporation’s pro rata share, for purposes of this right, is the ratio of the
Common Stock and Stock Equivalents owned by it immediately prior to the issuance
of New Securities to all Common Stock and Stock Equivalents outstanding
immediately prior to the issuance of New Securities.

As used in this Schedule 2.2, (i) “New Securities” means Common Stock or Stock
Equivalents of the Company whether now authorized or not, and securities of any
type whatsoever that are, or may become, convertible into, or exchangeable or
exercisable for, Common Stock or Stock Equivalents; (ii) “Person” means any
natural person, corporation, company, partnership, firm, voluntary association,
joint venture, trust, unincorporated organization, Authority or any other entity
whether acting in an individual, fiduciary or other capacity; and (iii) “Stock
Equivalents” mean preference shares, bonds, loans, warrants or other similar
instruments or securities which are convertible into or exercisable or
exchangeable for, or which carry a right to subscribe for or purchase, Common
Stock of the Company convertible into or exercisable or exchangeable for Common
stock, in each case, on an as converted basis.

3

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Schedule 2.4

No Violation

None.

4

--------------------------------------------------------------------------------

Schedule 2.5

Litigation

SEC Inquiry of Navidec

Navidec was advised in February 2004 that the SEC was conducting an informal
inquiry to determine whether Navidec had violated federal securities laws. Based
on the information made available to the Company, it believes the SEC’s
investigation relates, at least in part, to the restatement of Navidec’s
reported earnings for the first and second quarters of 2003. This restatement
was reported in Navidec’s Form 10-Q for the third quarter of 2003 filed on
December 11, 2003.

In December 2004, the Company received notice that the SEC had issued an Order
Directing a Private Investigation and Designating Officers to Take Testimony and
would be conducting a formal investigation. Pursuant to the Merger Agreement,
the Company has been indemnified by NFS for the costs of the SEC investigation,
and NFS has borne the costs incurred to date. The Company is not aware of the
future actions, if any, which the SEC intends to pursue in this matter, but no
assurance can be given that the investigation has been and will be resolved
without negative consequences to the Company.

Transfer of Ownership in NFS

On July 8, 2004, Navidec and BPZ-Texas entered into a Merger Agreement which was
consummated on September 10, 2004. The Merger Agreement provided that all of the
pre-merger business operations, assets and liabilities of Navidec would be
transferred to a wholly-owned subsidiary, Navidec Financial Services, Inc.
(“NFS”), followed by the transfer of NFS to the pre-merger shareholders of
record as of September 9, 2004, the day prior to the consummation of the Merger.
See “Business and Properties—Navidec Merger Transaction,” “Risk Factors—Risk
Relating to the Offering—The transfer of NFS could result in liability to us
because the shares transferred were not registered with the SEC,” and Note 2 to
the Consolidated Financial Statements, included in this filing, for detailed
discussion regarding the Merger.

The Merger Agreement provided that the transfer of all of the pre-merger
business operations, assets and liabilities of NFS was effective as of September
9, 2004. Accordingly, the Company originally believed that it had no continuing
ownership of NFS and, therefore, did not account for the post-merger operations
of NFS in the presentation of its financial statements. After receipt of
comments from the SEC in connection with its review of the Company’s
registration statement on Form SB-2 originally filed on July 27, 2005 and
further review of this issue, the Company concluded it was the record, but not
beneficial, owner of NFS shares, and that any ownership interest was at most
temporary.

5

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In part because of difficulty obtaining necessary information from NFS to
clarify the ownership issue, the Company commenced an action against NFS (the
“Action”) on or about February 13, 2006, in District Court, Arapahoe County,
Colorado (the “Court”), seeking dissolution of NFS, the appointment of a
receiver, and access to NFS corporate records. The Company commenced the Action
uncertain whether or when the required spin-off of NFS shares pursuant to the
terms and conditions of the Merger had occurred under Colorado corporate law.
The Company asserted in the Action that it believed it was a record shareholder
of NFS as of the date of the request and had standing for the relief sought. NFS
denied that the Company had standing to act as a shareholder and asserted that
the Company had not been a shareholder of NFS since September 9, 2004. The
Action was settled amongst the parties on May 19, 2006. In connection with the
settlement, a Finding of Fact and Conclusions of Law (the “Order”) was issued by
the Court stating that the Company was not a shareholder of NFS at any time
after September 9, 2004.

6

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Schedule 2.6

Capitalization

Ownership of Equity Interest

The Company owns 100% of the capital stock of each of the Subsidiaries.  See
Schedule 2.1.

Dilutive Securities

In addition to the shares issued and outstanding, the Company has the following
potentially dilutive securities.

 

March 31,

 

 

 

2007

 

Stock options outstanding

 

3,957,000

 

Warrants outstanding

 

250,000

 

Shares issuable to consultant for services

 

—

 

Contingent incentive earn-out shares

 

450,000

 

Contingent Merger earn-out shares

 

9,000,000

 

 

 

 

 

Total potentially dilutive securities

 

13,657,000

 

 

 

 

 

Shares available for grant pursuant to Long-Term Incentive Compensation Plan

 

1,156,000

 

 

Stock Options Outstanding

In connection with the Merger, BPZ, as the accounting acquirer, assumed all
Navidec stock options outstanding, which were fully vested on the date of the
Merger and expire on September 10, 2007.  Exercise prices on these stock options
range from $1.30 to $1.93 per share.  Under the terms of the Merger agreement,
NFS is entitled to receive all proceeds from the exercise of these options.  As
of March 31, 2007, there were 171,000 Navidec stock options outstanding.

In July 2004, the Company granted options to purchase 1,000,000 shares of common
stock at an exercise price of $1.30 per share to the former CEO of Navidec in
connection with his service as a director and financial consultant to the
Company. On the date of the Merger, 500,000 of such stock options became fully
vested. Vesting of the remaining 500,000 stock options is contingent upon the
receipt of additional investment proceeds totaling $6 million, including
proceeds from the exercise of outstanding warrants.  As of the date of this
filing, the grantee has fulfilled his obligation to raise $6,000,000 under the
above agreement and as such, has vested in the remaining 500,000 stock options.
These stock options, when vested, expire 10 years from the date of grant.

7

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Warrants Outstanding

In connection with the Merger, BPZ issued warrants to purchase 1,500,000 shares
of common stock at an exercise price of $2.00 per share in connection with an
agreement for investor relations, public relations and other financial advisory
services.  Such warrants expire on July 31, 2006.  Subsequent to the Merger, NFS
conveyed 540,000 of such warrants to third parties.  As of March 31, 2007, there
were 1,191,500 of such warrants outstanding, of which 810,000 were held by NFS.

For their role as placement agent, in connection with the private placement of
11,466,000 shares of common stock in July 2005, Morgan Keegan & Company, Inc.
received fully vested warrants to purchase 100,000 shares of the Company’s
common stock at an exercise price of $3.00 per share. Such warrants expire on
July 19, 2010.

Additionally, for their financial advisory services, in connection with the
private placement of 4,482,000 shares of common stock in June 2006, Morgan
Keegan & Company, Inc., received fully vested warrants to purchase 150,000
shares of the Company’s common stock at an exercise price of $3.00 per share.
Such warrants expire on June 30, 2011.

Merger Earn-Out Shares

Under the terms of the Merger Agreement, the Company committed to issue
18,000,000 shares to the former shareholders of BPZ-Texas on a contingent
earn-out basis if the Company achieves certain reserve and production goals. The
first earn-out target relating to reserves was achieved in December 2004 and
9,000,000 of the earn-out shares were issued. The remaining 9,000,000 earn-out
shares are issuable once the Company is entitled to receive as its proportionate
share from gross production from any oil and gas wells owned or operated by the
Company not less than 2,000 barrels of oil per day or its equivalent
(approximately 12 million cubic feet of gas per day) prior to December 28, 2007.

For accounting purposes, the earn-out arrangement is treated as a stock dividend
because the earn-out is payable to the shareholders of the accounting acquirer,
BPZ-Texas. Accordingly, except for a retroactive increase in the number of
common shares outstanding for all periods presented, no accounting entry is
required upon the issuance of the earn-out shares.

Contingent Earn-Out Shares

As of March 31, 2007, the Company has an obligation to issue 450,000 shares of
incentive stock awards to two of the Company’s officers. The incentive stock
awards vest and the earn-out shares are issuable once the Company is entitled to
receive as its

8

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proportionate share from gross production from any oil and gas wells owned or
operated by the Company not less than 2,000 barrels of oil per day or its
equivalent (approximately 12 million cubic feet of gas per day) prior to
December 28, 2007, the same target applicable to the Merger earn-out shares (see
above).

Long-Term Incentive Compensation Plan

The Company adopted the BPZ Energy, Inc. Long-Term Incentive Compensation Plan
(the “LTIP”) in July 2005.  The LTIP will be administered and managed within the
discretion of the compensation committee of the Company or, in the absence of
such committee, by the Board of Directors.  Incentives under the LTIP may be
granted to eligible employees, directors or consultants in any one or a
combination of incentive options, non-statutory stock options, stock
appreciation rights, restricted stock grants, stock grants and performance
shares.  As of March 31, 2007, the Company had granted restricted stock awards
totaling 1,146,500 shares, of which 751,500 remain unvested as of March 31,
2007; had granted 1,697,500 options to purchase shares, to certain employees and
board of directors, of which 1,597,500 are unvested as of March 31, 2007; and
had 1,156,000 shares of common stock available for the grant of incentives under
the LTIP.

Preemptive Rights

See Schedule 2.2, which is incorporated herein by reference as if set out in
full.

9

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Schedule 2.7

Annual Report; Financial Statements; Absence of Certain Changes

Amended Financial Statements

On April 24, 2007, the Company filed an amendment to its Annual Report on Form
10-K for the year ended December 31, 2006 to include the information required by
Part III of said report.  Certain information required by Part III was to be
incorporated by reference to the Company’s definitive proxy statement for the
2007 Annual Meeting of Shareholders, but this proxy statement will not be filed
within 120 days of the fiscal year ended December 31, 2006 as is required by the
SEC in order for the Company to incorporate by reference such information in
Part III of its Annual Report on Form 10-K.

Absence of Certain Changes

None.

10

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Schedule 2.9

Income Tax Returns

The legal conflict between the Company and NFS has been resolved and as a result
the Company is in the final stages of filing appropriate federal income tax
returns for the years ended December 31, 2004 and 2005.  All necessary
information has been accumulated and the IRS forms are in the process of being
completed.  The Company expects to file the forms at the beginning of May 2007
and estimates that the taxes, penalties and interests assessed will be less than
$100,000.  The assessed tax, penalties and interest is related to SMC Ecuador,
Inc., a wholly owned subsidiary of BPZ Energy, Inc., and its income related to
its 10% non-operated working interest in an oil and gas producing property,
Block 2, located in the southwest region of Ecuador (The Santa Elena Property)
during the respective years.  The Company was unable to file consolidated
returns for the respective years, as it did not elect to do so in a timely
manner, and thus resulted in the Company’s inability to utilize its consolidated
NOL to offset the tax assessment on SMC Ecuador, Inc.

An extension has been filed for the federal tax return for the year ended
December 31, 2006.  The Company expects to file its 2006 return within the
extended time allowed.  In addition, the Company has elected to file a
consolidated return for the year ended December 31, 2006and as such it is
anticipated that no tax, penalties or interests will be assessed for said
period.

All necessary state, local and foreign taxes have been paid and the appropriate
forms have been filed within the respective jurisdictions.  The Company is
currently in good standing in all taxing jurisdictions in which it is
registered.

11

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Schedule 2.11

ERISA

ERISA Compliance

None.

Employee Benefit Plans

1.  BPZ Energy, Inc. Long-Term Incentive Compensation Plan

The Company adopted the BPZ Energy, Inc. Long-Term Incentive Compensation Plan
(the “LTIP”) in April 2005 and it was approved by the Company’s shareholders in
July 2005.  The LTIP will be administered and managed within the discretion of
the compensation committee of the Company or, in the absence of such committee,
by the Board of Directors.  Incentives under the LTIP may be granted to eligible
employees, directors or consultants in any one or a combination of incentive
options, non-statutory stock options, stock appreciation rights, restricted
stock grants, stock grants and performance shares.

Key Terms

The following is a summary of the key provisions of the LTIP:

Plan Term:

 

April 15, 2005 to April 15, 2015.

 

 

 

Eligible Participants:

 

The Company’s directors, employees and consultants and the employees of certain
of its affiliates. The Company currently has 25 employees and four directors who
are eligible to participate under the LTIP.

 

 

 

Shares Authorized:

 

4,000,000, subject to adjustment to reflect stock splits and similar events. The
LTIP provides a further limit of 1,600,000 shares of the 4,000,000, which may be
issued as restricted stock grants, stock grants, other stock-based incentives
and performance shares.

 

 

 

Award Types:

· 

incentive stock options under Section 422 of the Internal Revenue Code;

 

· 

non-statutory stock options not covered under Section 422 of the Internal
Revenue Code;

 

· 

stock appreciation rights, granting the recipient the right to receive an excess
in the fair market value of shares of stock over a specified reference price;

 

· 

restricted stock, which will be nontransferable until it vests over time;

 

· 

qualified performance-based incentives to employees who qualify as covered
employees within the meaning of Section 162(m) of the Internal revenue Code;

 

· 

unrestricted stock, which will be immediately transferable; and

 

· 

other stock-based incentive awards.

 

12

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· 

incentive stock options under Section 422 of the Internal Revenue Code;

Vesting:

 

To be determined by the compensation committee. Awards will generally vest in
four years unless otherwise determined in the compensation committee’s
discretion.

 

The Board may discontinue the LTIP at any time and may amend or revise the terms
of the LTIP as permitted by applicable statute; except that it may not revoke or
alter, in a manner unenforceable to the grantees of any incentives, any
incentives outstanding, nor may the Board amend the LTIP without shareholder
approval where the absence of such approval would cause the LTIP to fail to
comply with Rule 166-3 under the Securities Exchange Act of 1934, or any other
applicable law or regulation.

Vesting and Exercise of Stock Options

The exercise price of stock options or stock appreciation rights granted under
the LTIP may not be less than the fair market value of the common stock on the
date of grant. The term of these awards may not be longer than ten years. The
compensation committee will determine at the date of grant when each such award
becomes vested and/or exercisable.

Vesting of Restricted Stock Awards and Options

The compensation committee may make the grant, issuance, retention and/or
vesting of restricted stock awards and options contingent upon continued
employment (or engagement) with Company, the passage of time, or such
performance criteria and the level of achievement compared to such criteria as
it deems appropriate.

Eligibility Under Section 162(m)

Awards may, but need not, include performance criteria that satisfy
Section 162(m) of the Tax Code. To the extent that awards are intended to
qualify as “performance-based compensation” under Section 162(m), the
performance criteria may include the following criteria, either individually,
alternatively or in any combination, applied to either the company as a whole or
to a business unit or subsidiary, either individually, alternatively, or in any
combination, and measured either annually or cumulatively over a period of
years, on an absolute basis or relative to a pre-established target, to previous
years’ results or to a designated comparison group, in each case as specified by
the compensation committee in the award:

·                  pre-tax or after-tax net earnings,

·                  sales growth,

·                  operating earnings,

·                  operating cash flow

·                  return on net assets,

·                  return on shareholders’ equity,

·                  return on assets,

·                  return on capital,

·                  stock price grown,

·                  gross or net profit margin,

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·                  earnings per share,

·                  price per share of stock,

·                  market share, and

·                  such other performance measures as the compensation committee
may determine.

To the extent that an award under the LTIP is designated as a “performance
award,” but is not intended to qualify as performance-based compensation under
Section 162(m), the performance criteria can include the achievement of
strategic objectives as determined by the Board.

Notwithstanding satisfaction of any completion of any performance criteria
described above, to the extent specified at the time of grant of an award, the
number of shares of common stock, stock options or other benefits granted,
issued, retainable and/or vested under an award on account of satisfaction of
performance criteria may be reduced by the compensation committee on the basis
of such further considerations as the compensation committee in its sole
discretion determines.

Transferability

Awards granted under the LTIP are not transferable except by will or the laws of
descent and distribution except that the compensation committee may consent to
permit the transfer of a non-qualified stock option. The LTIP specifically
prohibits transfers by an individual for consideration.

Administration

The compensation committee will administer the LTIP. The compensation committee
will select the Company employees and other participants who receive awards,
determine the number of shares covered thereby, and, subject to the terms and
limitations expressly set forth in the LTIP, establish the terms, conditions and
other provisions of the grants. The compensation committee may interpret the
LTIP and establish, amend and rescind any rules relating to the LTIP. The
compensation committee may delegate to a committee of one or more directors or
to Company officers the ability to grant awards and take certain other actions
with respect to participants who are not executive officers.

Amendments

The Board of Directors may terminate or discontinue the LTIP at any time and may
amend the plan at any time, as permitted by applicable statutes. However, the
Board may not revoke or alter, in a manner unfavorable to the LTIP’s
participants, the terms of any award under the LTIP then outstanding. The Board
of Directors is further restricted from amending the LTIP without shareholder
approval if the absence of such approval would cause the LTIP to fail to comply
with Rule 16b-3 under the Securities Exchange Act of 1934 or any other
applicable law or regulation.

14

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Adjustments

In the event of a stock dividend, recapitalization, stock split, combination of
shares, reorganization, or exchange of Company’s common stock, or any similar
event affecting Company’s common stock, the compensation committee shall adjust
the number and kind of shares available for grant under the LTIP, and subject to
the various limitations set forth in the LTIP, the number and kind of shares
subject to outstanding awards under the LTIP, and the exercise or settlement
price of outstanding stock options and of other awards.

The impact of a merger or other reorganization of Company on awards granted
under the LTIP shall be specified in the agreement relating to the merger or
reorganization, subject to the limitations and restrictions set forth in the
LTIP. Such agreement may provide for, among other things, assumption of
outstanding awards, accelerated vesting or accelerated expiration of outstanding
awards, or settlement of outstanding awards in cash.

2.  Navidec, Inc. 2004 Stock Option Plan

Subsequent to the Merger, the Company discontinued the Navidec 2004 Stock Option
Plan (the “Navidec Plan”) and no options were granted under the Navidec Plan
subsequent to the Merger.

15

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Schedule 2.12

Contracts

Platform Refurbishment

In July 2005 (amended in January 2006), the Company signed a service contract
with Tecnomarine S.A.C. of Peru for the refurbishment of the Corvina CX-11X
platform.  Total refurbishment costs were approximately $3.0 million.

Power Plant Engineering Services Agreement

In August 2005 (amended February 2006), the Company signed an Engineering
Service Agreement with BTEC Turbines LP (“BTEC”) for approximately $3.8 million,
whereby BTEC will provide, design and engineering services for the Company’s
planned 180 megawatt power plant.

Drilling

In December 2005, the Company signed a drilling contract with Petrex S.A., a
subsidiary of Saipem SpA of Italy. Under the contract, Petrex S.A. will provide
a platform rig capable of drilling to 16,000 feet and upgrade the rig to meet
the Company’s specifications.  The Company intends to utilize the rig for the
initial development of the Corvina gas field and may also utilize it for the
expected development of the Albacora oil field, and potential appraisal wells in
the Piedra Redonda gas field.  The Company has agreed to pay a $5.5 million fee
to mobilize and upgrade the rig.  In exchange, the Company will receive a
competitive fixed day rate and exclusive rights to use the rig, at its option,
during the two-year period commencing with delivery of the rig.

Barge Purchase & Towing

In February 2006, the Company entered in to contracts with four vendors for the
purchase of a tender barge with a 200 ton crane and ancillary equipment,
including a smaller 35 ton crane and additional anchoring and winch systems, and
towage of the barge from Seattle, Washington to Peru.  Such barge and related
equipment will be utilized in the Company’s drilling operations.  The total
cost, including towage, is approximately $6.5 million.

Oilfield Services

In addition, the Company contracts with various oilfield service companies such
as: Schlumberger, Weatherford, Smith International, Qmax, Baker Hughes and
Tecnomarine for the various turnkey services needed in its operations such as
cementing, testing, drilling and casing tools, drilling fluids and marine
logistic services.

16

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Schedule 2.13

Environmental Matters

None.

17

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Schedule 2.15

Employees

None.

18

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Schedule 2.16

Title to Properties

Encumbrances

None.

19

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Schedule 2.17

Related Party Transactions

None.

20

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Schedule 2.20

No Anti-Dilution Rights

See Schedule 2.2, which is incorporated herein by reference as if set out in
full.

21

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Schedule 5.6

Form of Opinion of Counsel

See attached.

22

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FORM OF LEGAL OPINION

[ADAMS AND REESE LETTERHEAD]

May 4, 2007

To the Investors

Listed on Schedule A hereto:

Ladies and Gentlemen:

This opinion is furnished to you pursuant to the Stock Purchase Agreement by and
among the purchasers signatory thereto (the “Investors”) and BPZ Energy, Inc., a
Colorado corporation (the “Company”), dated as of May 4, 2007, (the
“Agreement”), which provides for the issuance and sale by the Company of Common
Stock on the Closing Date.  All terms used herein have the meanings defined for
them in the Agreement unless otherwise defined herein.

We have acted as counsel for the Company in connection with the offering of
Common Stock to the persons named on Schedule A hereto (the “Investors”).

As counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion. 
We have examined and are familiar with the following:

1.                         The Agreement executed by each Investor;

2.                         The Purchaser Suitability Questionnaire executed by
each Investor;

3.                         A copy, certified by the Secretary of the Company, of
resolutions adopted by the Board of Directors of the Company on May 4, 2007,
authorizing the execution and delivery of the Agreement;

4.                         A Certificate of the Secretary of the State of
Colorado dated May 4, 2007 as to the legal existence and good standing of the
Company in Colorado;

5.                         A certificate of the President and Secretary of the
Company confirming certain factual matters for purposes of the opinions
expressed below; and

23

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6.                         Such other documents and instruments as we have
considered necessary for the purposes of the opinions hereinafter set forth.

In our examination of the foregoing, we have assumed the authenticity of all
documents submitted to us as original documents, the conformity to the originals
of all documents submitted to us as copies, the genuineness of signatures, and
the legal capacity of all signatories. We have also relied upon a certificate or
certificates of an official, officer, or authorized representative of the
particular governmental authority, corporation, company, firm or other person or
entity concerned with respect to the factual determinations underlying the legal
conclusions set forth herein. We have not attempted to verify independently such
representations and statements. We have also assumed, without independent
verification, the accuracy of the representations made by the Investors in the
Agreement.

We have not made any investigation of the laws of any jurisdiction other than
the State of Texas, the federal securities laws of the United States, the
Colorado Business Corporation Act statute (the “Colorado Act”), and we are
opining herein solely with respect to the laws of the State of Texas, and the
federal securities laws of the United States.

The opinions hereinafter expressed are qualified to the extent that the validity
or enforceability of any of the agreements, documents or obligations referred to
herein may be subject to or affected by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws relating to or
affecting the rights of creditors generally, (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice and
hearing and (iii) duties and standards imposed on creditors and parties to
contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing. Furthermore, we express no opinion as to the
availability of any equitable or specific remedy upon any breach of such
documents or any of the agreements, documents or obligations referred to
therein, inasmuch as the availability of such remedies may be subject to the
discretion of a court, nor do we express any opinion herein as to the
enforceability of any of the indemnification or contribution provisions included
in any of the agreements, documents or obligations referred to herein.

We have assumed that each Investor has full power and authority to execute and
deliver the Agreement between such Investor and the Company and that such
Agreement has been fully executed and delivered by such Investor and is
enforceable against such Investor in accordance with its terms.

For purposes of our opinions set forth in paragraphs 1 through 3 below as to the
legal existence and good standing of the Company in the State of Colorado, we
have relied solely on the certificates described in paragraphs 4 and 5 above,
respectively, and such opinions are, accordingly, rendered as of the respective
dates of such certificates, with telephonic confirmation of the continuing
accuracy of the certificates as of the Closing Date.

Our opinions in paragraphs 5 and 7 below are limited in that we express no
opinion with respect to any federal or state securities antifraud laws or
fraudulent transfer laws.

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Any reference to “our knowledge”, “knowledge”, “to our attention” or any
variation of any of the foregoing shall mean the conscious awareness of the
attorneys in this firm, who have rendered substantive attention to this
transaction, of the existence or absence of any facts which would contradict our
opinions set forth below. We have not undertaken any independent investigation
to determine the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from the
fact of our representation of the Company.

Based upon the foregoing, we are of the opinion that:

1.             The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado.

2.             The Company has all requisite corporate power and authority to
own, lease and use its properties and conduct the business in which it is
engaged as described in the Company’s SEC filings.

3.             The Company has all requisite corporate power and authority to
execute and deliver the Agreement, and to issue the Common Stock in accordance
with and upon the terms and conditions set forth in the Agreement and to
otherwise perform its obligations under the Agreement.

4.             The Agreements have been duly authorized, executed and delivered
by the Company.

5.             Based in part on, and assuming the accuracy of, the
representations and warranties made by the Company and the Investors in the
Agreements, the offer and sale to the Investors of Common Stock in the Company
was made pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended.

6.             The Common Stock being delivered to the Investors pursuant to the
Agreements have been duly and validly authorized and, when issued, delivered and
paid for as contemplated in the Agreements will be duly and validly issued,
fully paid and non-assessable.

7.             The execution, delivery and performance of the Agreements by the
Company and the consummation by the Company of the transactions contemplated
thereby, including, without limitation, the issuance of the Common Shares, does
not and will not (i) result in a violation of the Company’s Certificate of
Incorporation or By-Laws; (ii) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a default)
under, require a consent under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement to which the
Company is a party that is filed as an exhibit to the Company’s most recent
filing on Form 10-K; or (iii) result in a violation of any federal or state law,
rule or regulation or any rule or regulation of the Trading Market applicable to
the Company or by which any property or asset of the Company is bound or

25

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affected, except for such violations as would not, individually or in the
aggregate, have a material economic effect on the Company.

This opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.

Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is solely for your benefit in connection with transactions described above and
may not be quoted or relied upon by any person or entity or used for any other
purpose, without our prior written consent.  This letter speaks only as of the
date hereof and we have no responsibilities to update or supplement it after
such date.

 

Very truly yours,

 

 

 

 

 

Adams and Reese llp

 

26

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SCHEDULE A

INVESTORS OF BPZ ENERGY, INC.

May 4, 2007

Investor

 

Shares

 

 

 

 

 

Total Shares

 

6,670,000

 

 

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