STOCK PURCHASE AGREEMENT

by and among

BPZ Energy, Inc. and
the Investors Named Herein

 
 
Dated June 30, 2006
 

1

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated June 30, 2006, 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
$2.75. The closing (the “Closing”) of the sale of the Shares shall be effected
at the offices of the Company on June xx, 2006, 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):

“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, 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.

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. 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, (iii) result in a
violation of, or (iv) require any authorization, consent or approval not
heretofore obtained pursuant to, 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 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, 42,633,747 shares of which
have been validly issued and are outstanding as of June 16, 2006 (and such
issued shares are fully paid and non-assessable), and 25,000,000 shares of
preferred stock, no par value, none of which are issued or outstanding as of
June 16, 2006. 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 pre-emptive 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.

2.7 Annual Report; Financial Statements. Except as qualified by Schedule 2.7,
the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005
(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 Reports
on the date filed with the SEC, and the SEC Report did not contain, on the date
of filing with the SEC, and do 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 Reports (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, 2005, (iii) liabilities
incurred as a result of the transactions described on Schedule 2.7, or
(iv) liabilities which were not required by generally accepted accounting
principles to be reflected or reserved on the Company Financial Statements.
Since December 31, 2005, 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, 2005 (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 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 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
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 Reports that provides for payments
to or by the Company or any Subsidiary in excess of $250,000, 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 in all material respects 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 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 substantially 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 those contracts described in the SEC
Reports 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 (iv) 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 issue warrants to purchase 150,000 shares to
Morgan Keegan & Company, Inc. (the Financial Advisor). Except for such warrants,
the Company 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.

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, 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.

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 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.

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.

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.

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 have a Materially Adverse Effect since December 31, 2005.

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 be listed on the American Stock Exchange (or, if
such listing cannot be obtained, upon NASDAQ or another exchange) as soon as
practicable following the date hereof. 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 date of filing the Company’s restated Form
10-K for the years ended December 31, 2005 and 2004, including the quarterly
periods contained therein, as well as, its restated Form 8-K/A filed on
January 17, 2006 and its Form 10-Q for the quarter ended March 31, 2006 (the
“Registration Statement Filing Deadline”), a Registration Statement on Form SB-2
or 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 sixty (60) days after its filing date or in the
event of SEC review, ninety (90) days from the date of filing (the
“Effectiveness Deadline”), 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 without volume
restrictions pursuant to either Rule 144 or 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.

(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 thirty (30) 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 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, 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.

(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.

(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 thirty (30) days after 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 paid by the Company
to the Investors. The amount to be paid by the Company to the Investors under
the Liquidated Damage Rate shall be determined 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 under the Liquidated Damage Rate 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 one hundred fifty (150) days after the date
hereof, then the Company shall make a one-time payment to the Investors equal to
five percent (5%) of the purchase price for the Shares.

(l) The amounts payable under sections 6.2 (i),(j) or (k) above shall be paid by
the Company to the Investors, pro rata, at the option and sole discretion of the
Company, by (i) wire transfer of immediately available funds within five
(5) business days after each Computation 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 two dollars and seventy-five cents
($2.75) per share.

As used in this Section 6.2, “Computation Date” means the date which 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.

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 without volume restrictions pursuant to either Rule 144 or 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 SB-2 or 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
SB-2 or 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.

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”) with respect to which registration,
qualification or compliance has been effected pursuant to Section 6.2, 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 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’ Affiliates, for 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. Provided, however, that 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 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. Provided, however, that 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.

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.

(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, 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.
580 Westlake Park Blvd., Suite 525
Houston, Texas 77079
Attn: Chief Executive Officer and President
Fax: (281) 556-6377
Attn: Chief Financial Officer
  Adams and Reese LLP
4400 One Houston Center
1221 McKinney
Houston, Texas 77010
Attn: Mark W. Coffin
Fax: (713) 652-5152

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 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. The Company may, at its option, issue a press release
regarding the closing of this offering within a reasonable period after the
Closing. 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, 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.

2

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:

     

     

     

3

Schedule 1.1
Investors

Investor Shares

4

Schedule 2.1
Organization, etc.

Subsidiaries

1. BPZ Energy, Inc., a Texas corporation

2. SMC Ecuador, Inc., a Delaware corporation

3. Navidec Financial Services, Inc., a Colorado corporation (a)

Branch Offices

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

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

(a) Note:

The Company is contractually bound to spin-off Navidec Financial Services, Inc.
(“NFS”) to the pre-merger shareholders of Navidec.  Pending the distribution of
NFS common shares to the beneficiaries of the spin-off, the Company is the
nominal owner of those shares.  While the Company may be deemed to have majority
nominal ownership of the common stock of NFS, it does not control NFS.  As such,
the Company has determined that the equity method of accounting is the most
appropriate manner to reflect its nominal ownership of NFS during the period of
time between the Merger and its ultimate spin-off to the pre-merger shareholders
of Navidec. The Company’s nominal ownership interest in NFS was approximately
65.1% as of December 31, 2005.

The Company previously amended and restated certain of its issued financial
statements and other financial information on January 17, 2006 in response to
previous SEC review comments. In its amended SEC filings, the Company accounted
for its relationship with NFS under the equity method of accounting as stated
above. Subsequent to the January 17, 2006 restatement, the Company has had an
ongoing dialogue with the SEC concerning the SEC’s continuing review of the
accounting treatment of the Company’s relationship with NFS and other matters
related to the Merger. Based upon this review, the Company may have to restate
its financial statements to fully consolidate the financial results of NFS
subsequent to the merger until the shares of NFS are determined to have been
distributed to the pre-merger shareholders of Navidec. See Schedule 2.7.

5

Schedule 2.4
No Violation

None.

6

Schedule 2.5
Litigation

On February 14, 2006, the Company filed a petition in the District Court of
Arapahoe County, Colorado for the judicial dissolution of Navidec Financial
Services, Inc. (“NFS”) and the appointment of a receiver for NFS. BPZ is seeking
this action on behalf of those shareholders entitled to the spin-off of NFS
shares pursuant to the Merger Agreement with Navidec, Inc. dated July 8, 2004.
Despite the fact that the Merger was consummated in September 2004, the spin-off
has not occurred and it appears highly unlikely or impossible that it will be
completed.

On May 19, 2006, BPZ Energy, Inc. (the “Company”) entered into a Settlement
Agreement and Mutual Release (the “Agreement”) by and among the Company, NFS,
and John McKowen, the Chief Executive Officer of NFS and former Chief Executive
Officer and Director of the Company (collectively, the “Parties”).

The Agreement settles all disputes amongst the Parties relating to a civil
action filed by the Company in February, 2006 against NFS in District Court,
Arapahoe County, Colorado, Case Number 2006-CV-941 (“the Action”), seeking
dissolution of NFS, the appointment of a receiver, and access to the NFS
corporate records. The Action was more fully described in a Form 8-K filing made
by the Company on February 14, 2006. The Agreement provides for (i) a complete
mutual release between the Parties of any and all claims relating to the Action,
(ii) the agreement of the Parties that NFS will file for declaratory relief or a
declaratory action in Arapahoe County District Court solely on the issue of
whether BPZ is or was a record owner of NFS shares at any time after
September 9, 2004, (iii) access by the Company to the financial records of NFS
as may be necessary for the Company to restate its financial statements and make
required SEC filings as described in Item 4.02 of this Form 8-K filing and
(iv) the granting of certain rights extending the exercise period for options
and warrants held by NFS and certain of its affiliates, certain rights
concerning cashless exercise of those securities if they are not registered by
January 30, 2007, and certain modifications to the registration rights held by
NFS and certain of its affiliates, permitting the Company to complete the
registration of securities issued in the $34.4 million private placement
completed by the Company in July, 2005, before registering Company securities
held by NFS and certain of its affiliates.

7

Schedule 2.6

Capitalization

Ownership of Equity Interest

Other than Navidec Financial Services, Inc. (“NFS”), of which the Company’s
nominal ownership interest was approximately 65.1% as of December 31, 2005, the
Company owns 100% of the capital stock of each of the Subsidiaries. See
Schedule 2.1 for further discussion regarding NFS.

Dilutive Securities

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

          Stock options outstanding   1,378,652 Warrants outstanding   1,325,000
Merger earn-out shares   9,000,000 Contingent earn-out shares   485,000 Shares
and options granted under LTIP   2,520,000
Total potentially dilutive securities issued
    14,708,652  
Shares and options available under LTIP
    1,4840,000  

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 June 16, 2006, there were 378,652 Navidec stock options outstanding.

Additionally, 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. Of such stock options, 500,000 were fully vested on the date of the
Merger. The remaining 500,000 stock options will vest upon the receipt of
additional investment proceeds totaling $6 million, including proceeds from the
exercise of outstanding warrants, provided such funding is received no later
than September 10, 2006. These stock options, when vested, expire 10 years from
the date of grant.

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 June 16, 2006, there
were 1,225,000 of such warrants outstanding, of which 810,000 were held by NFS.

In connection with the private placement on July 19, 2005, the Company issued to
the placement agent warrants to purchase 100,000 shares of the Company’s common
stock at an exercise price of $3.00 per share with a five-year term.

Merger Earn-Out Shares

Under the terms of the Merger Agreement, the Company was committed to issue an
additional 18,000,000 shares to the former shareholders of BPZ on a contingent
earn-out basis if the Company is able to achieve 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 on July 1, 2005. 
The remaining 9,000,000 earn-out shares are contingent on the Company achieving
production of 2,000 barrels of oil per day or its equivalent (approximately
12 million cubic feet of gas per day) prior to December 28, 2007.

Contingent Earn-Out Shares

As of December 31, 2005, the Company had an obligation to issue 485,000 shares
of contingent restricted common stock, to three of its officers, which will vest
only if the Company achieves the second earn-out target under the Merger
Agreement. Such earn-out target requires that the Company achieve production of
2,000 barrels of oil per day or its equivalent (approximately 12 million cubic
feet of gas per day) prior to December 28, 2007.

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 June 16, 2006, the Company had granted restricted stock awards
totaling 1,190,000 shares (of which 1,120,000 are issued and outstanding, and
855,000 remain unvested as of June 16, 2006); had granted 1,330,000 options to
purchase shares, to certain employees and board of directors, at strike prices
of $3.20 and $3.35 respectively, all of which are unvested as of June 16, 2006;
and had 1,480,000 shares of common stock available for the grant of incentives
under the LTIP.

8

Schedule 2.7
Annual Report; Financial Statements; Absence of Certain Changes

Amended Financial Statements

As of the date hereof, the following SEC reports have been amended:

  •   Form 10-QSB/A Amended Quarterly Report for the quarter ended June 30,
2005, filed January 17, 2006;

  •   Form 10-QSB/A Amended Quarterly Report for the quarter ended March 31,
2005, filed January 17, 2006;

  •   Form 10KSB/A Amendment No. 2 to Annual Report for the fiscal year ended
December 31, 2004, filed January 17, 2006;

  •   Form 10KSB/A Amendment No. 1 to Annual Report for the fiscal year ended
December 31, 2004, filed December 23, 2005; and

  •   Form 8-K/A Amended Current Report for the report dated September 10, 2004,
filed January 17, 2006.

Absence of Certain Changes

As of November 16, 2005, the Company’s Registration Statement on Form SB-2 had
not been declared effective. Accordingly, the Company is subject to the payment
of liquidated damages in the amount of $343,980 for each 30-day period from that
date until the Registration Statement is declared effective. Certain of the
July 2005 private placement investors, totaling 79% of the aggregate investment,
agreed to accept common stock in lieu of cash for a maximum period of 90 days
which ended February 14, 2006.

The Company received additional review comments from the SEC on or about
April 5, 2006 and concluded that a further restatement of its prior period
financial statements is likely. The issues raised by the SEC include (i) the
accounting treatment for the Company’s relationship with NFS, (ii) the financial
statement presentation of the pre-merger operations of BPZ Energy, Inc., a Texas
corporation (BPZ-Texas), during the period it was a privately-held company under
control of its then-parent company, BPZ & Associates, Inc., and (iii) the timing
and accounting treatment for the distribution of the first tranche of earn-out
shares payable to the pre-merger shareholders of BPZ-Texas. This restatement
will not affect the Company’s current cash position. Additional discussion of
these accounting matters may be found in the Form 8-K described above. These
matters have been discussed with the Company’s Independent Registered Public
Accounting Firm, Johnson Miller & Co., CPA’s, P.C., who are expected to assist
with the necessary restatements.

In light of the SEC’s comment letter and the likelihood of a further
restatement, the Company filed a Form 8-K on May 22, 2006 indicating that its
previously issued financial statements and other financial information contained
in the Company’s Forms 10-KSB for the years ended December 31, 2005 and 2004,
including the quarterly periods contained therein, and its Form 8-K/A filed on
January 17, 2006 should no longer be relied upon. Additionally, the Company will
not be able to file its Form 10-Q for the quarter ended March 31, 2006, nor will
it file its 2006 Annual Proxy Statement, until the restatement has been
completed. The Company expects the restatement process to be completed by
mid-August 2006, though it can give no assurance that any required restatements
will be completed by that date. An independent consulting firm, Opportune, LLP,
has been engaged to assist the Company with the preparation of any required
amendments to its SEC filings.

The Company’s ongoing review of the accounting issues discussed above and any
required restatements will further delay the effectiveness of the Company’s
pending Form SB-2 registration statement. As discussed above, this delay will
subject the Company to monthly penalties of $343,980 under the terms of the
$34.4 million private placement financing closed in July 2005. The Company has
initiated discussions with the relevant investors to determine whether some or
all of these penalties may be paid in common stock in lieu of cash. Certain of
the private placement investors, totaling 74% of the aggregate investment,
agreed to accept common stock in lieu of cash beginning on April 17, 2006.

On March 8, 2006 the Company completed a private placement of common stock for
proceeds of $5.0 million. The Company sold 1,670,000 shares to four
institutional and accredited investors at a price of $3.00 per share. There were
no warrants or dilutive securities issued to the investors in connection with
the offering. The offering was placed directly by the Company and there were no
placement fees or other direct expenses related to the offering. As of June 8,
2006, the Company’s Registration Statement on Form SB-2 had not been filed.
Accordingly, the Company is subject to the payment of liquidated damages in the
amount of $50,100 for each 30-day period from that date until the Registration
Statement is filed and declared effective. These penalties will be paid in
common stock in lieu of cash.

In December 2005, the Company notified Perupetro that it has exercised its
exclusive option to convert the current Technical Evaluation Agreement (“TEA”)
in Area VI, which covers 1,444,175 acres and encompasses the entire Lancones
Basin, to a License Contract for the exploration and development of
hydrocarbons. The former Area VI, will now be referred to as Block XXII and will
cover 948,000 acres. In addition, the Company announced that it will not apply
for a license contract for Area XVI. The technical work conducted by the Company
over the past two years has not demonstrated the upside potential and economics
to meet the Company’s objectives. Area XVI is a relatively small block
consisting of 109,612 acres in the Talara Basin.

On June 17, 2006 the Company was notified that it had won the licensing tender
for Block XXIII (247,827 acres) that is located onshore, between Blocks Z-1 and
XIX. The next step in the process is to finalize the corresponding License
Contract with Perupetro.

9

Schedule 2.9
Income Tax Returns

As a result of the ongoing legal conflict between the Company and NFS, as
discussed in Schedules 2.1 and 2.5, the Company has been unable to file its
federal income tax return for the year ended December 31, 2004. However, as a
result of its net operating losses, the Company believes that it does not have a
tax liability for said year.

10

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.

  •   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,

  •   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.

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.

11

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 are expected to approximate $2.0 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.

12

Schedule 2.13

Environmental Matters

None.

13

Schedule 2.15
Employees

None.

14

Schedule 2.16
Title to Properties

Encumbrances
None.

15

Schedule 2.17
Related Party Transactions

None.

16

Schedule 2.20
No Anti-Dilution Rights

None.

17

Schedule 5.6
Form of Opinion of Counsel

See attached.

18

FORM OF LEGAL OPINION

[ADAMS AND REESE LETTERHEAD]

June 30, 2006

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 June xx, 2006, (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 June 15, 2006, authorizing the
execution and delivery of the Agreement;

  4.   A Certificate of the Secretary of the State of Colorado dated June 20,
2006 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

  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.

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 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

19

SCHEDULE A
INVESTORS OF BPZ ENERGY, INC.
June 30, 2006

Investor Shares

20