**EXHIBIT 10.16**

** **

**CONFORMED COPY**

** **

** **

**COMMON TERMS AGREEMENT**

 

among

 

**BPZ EXPLORACIÓN & PRODUCCIÓN S.R.L.**

as a Borrower

 

**BPZ MARINE PERU S.R.L.**

as a Borrower

 

**INTERNATIONAL FINANCE CORPORATION**

as lender under the IFC Facility

 

and

 

**THE ADDITIONAL SECURED FACILITY LENDERS**

upon execution of an accession agreement

 

Dated as of August 15, 2008

 

----

 

**TABLEOF CONTENTS**

 
|       |                                                   | **Page** |
|------------|--------------------------------------------------------|----------|
|       |                                                   |     |
| 1.         | LOAN AGREEMENTS; DEFINITIONS                           | 1        |
| 2.         | THE PROJECT                                            | 24       |
| 3.         | LOANS                                                  | 25       |
| 4.         | CONDITIONS PRECEDENT                                   | 27       |
| 5.         | REPRESENTATIONS AND WARRANTIES                         | 35       |
| 6.         | AFFIRMATIVE COVENANTS                                  | 43       |
| 7.         | NEGATIVE COVENANTS                                     | 53       |
| 8.         | EVENTS OF DEFAULT                                      | 57       |
| 9.         | MISCELLANEOUS                                          | 62       |
|       |                                                   |
| SCHEDULE 1 | MAXIMUM FACILITY AMOUNTS                               | 1        |
| SCHEDULE 2 | ANTI-CORRUPTION GUIDELINES FOR IFC  TRANSACTIONS       | 1        |
| SCHEDULE 3 | AUTHORIZATIONS                                         | 1        |
| SCHEDULE 4 | INSURANCE                                              | 1        |
|       |                                                   |     |
| EXHIBIT A  | FORM OF ACCESSION AGREEMENT                       |     |
| EXHIBIT B  | FORM OF  CERTIFICATE OF INCUMBENCY AND AUTHORITY  |     |
| EXHIBIT C  | FORM OF  LETTER TO AUDITORS                       |     |
| EXHIBIT D  | FORM OF  APPOINTMENT OF SERVICE OF PROCESS LETTER |     |
| EXHIBIT E  | FORM OF  DISTRIBUTION REQUEST                     |     |
|            |                                                        |          |  |  |

 

i

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**THIS COMMON TERMS AGREEMENT**(this“**Agreement**”) dated as of August 15, 2008 among:

 

**(1)****                                ****BPZExploración & Producción S.R.L.**, a company incorporated underthe laws of the Republic of Peru (“**BPZ Exploración**”****and a “**Borrower**”);

 

**(2)****                                ****BPZMarine Peru S.R.L.**, a company incorporated under the laws of theRepublic of Peru (“**BPZ Marine**”****and a “**Borrower**”****and, collectively with BPZ Exploración, the****“**Borrowers**”);

 

**(3)****                                ****INTERNATIONALFINANCE CORPORATION**, an international organization established byArticles of Agreement among its member countries including Peru (“**IFC**”); and

 

**(4)****                                ****THEADDITIONAL SECURED FACILITY LENDERS**,****upon executionof an Accession Agreement in accordance with Section 9.2 hereof.

 

# **1.**                                      LOAN AGREEMENTS; DEFINITIONS

# ** **

## ***1.1***                                 Loan Agreements

## *** ***

### **(a)**                                  This Agreement, including its definitions,conditions of disbursement, representations and warranties, covenants, eventsof default, principles of construction, rules of interpretation and itsjurisdiction, governing law and notice provisions, is made a part of each of(i) the IFC Loan Agreement, and (ii) upon execution of an AccessionAgreement, the Additional Secured Facility Agreement.

### ** **

### **(b)**                                 Subject to paragraph (c) below of thisSection 1.1:

### ** **

#### **(i)**                                     this Agreement and the IFC Loan Agreementshall be read and construed together as one agreement; and

#### ** **

#### **(ii)**                                  this Agreement and the Additional SecuredFacility Agreement shall be read and construed together as one agreement.

#### ** **

### **(c)**                                  If any provision of this Agreement conflictswith any provision of any Loan Agreement, then the provisions of the relevantFacility Agreement shall prevail.

### ** **

## ***1.2***                                 Definitions

## *** ***

Wherever used in this Agreement (includingits Schedules and Exhibits), unless the context otherwise requires, thefollowing terms have the following meanings:

 
| “**Accession Agreement**” | means  an agreement entitled “Accession Agreement” substantially in the form of  Exhibit A. |
|-------------------------------------|------------------------------------------------------------------------------------------------------------|

 

----

 
| “**Accounting Standards**”                   | means with respect to (i) each Borrower, (x) International  Financial Reporting Standards (IFRS) promulgated by the International  Accounting Standards Board (“IASB”) (which include standards and  interpretations approved by the IASB and International Accounting Standards  issued under previous constitutions) together with its pronouncements thereon  from time to time, and applied on a consistent basis, or (y) generally  accepted accounting standards in Peru promulgated by the relevant financial  and accounting standards board of Peru together with its pronouncements  thereon from time to time, and applied on a consistent basis and  (ii) BPZ Resources, generally accepted accounting principles and  practices in the United States promulgated by the Financial Accounting  Standards Board of the United States together with its pronouncements thereon  from time to time, and applied on a consistent basis. |
|--------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Action Plan**”                            | means  the plan or plans developed by the Borrowers setting out specific social and  environmental measures to be undertaken by the Borrowers, to enable the  Project to comply with the Performance Standards, as such Action Plan may be  amended or supplemented from time to time with the consent of the Facility  Agents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Additional  Secured Facility”**           | means  a US revolving loan facility made available by the Additional Secured  Facility Lenders in an aggregate amount not exceeding US$200,000,000 in  accordance with the terms of, and subject to the conditions of, this  Agreement and the Additional Secured Facility Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Additional  Secured Facility Agreement”** | means  the loan agreement among the Borrowers and the Additional Secured Facility  Lenders, in form and substance reasonably satisfactory to IFC, pursuant to  which the Additional Secured Facility Lenders make available the Additional  Secured Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** **                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Additional  Secured Facility Lenders”**   | means  the international commercial banks or other financial institutions reasonably  satisfactory to IFC that are party to the Additional Secured Facility  Agreement and, upon execution and delivery of an Accession Agreement, become  party to this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ** **                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Additional  Secured Facility Loans”**     | means  the loans to be extended by the Additional Secured Facility Lenders in  accordance with the terms of, and subject to the conditions of, this  Agreement and the Additional Secured Facility Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

2

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| “**Affiliate**”                     | means, with respect to any Person, any other Person, directly or  indirectly, controlling, controlled by, or under common control with, such  Person (for purposes of this definition, “control” means the power to direct  the management or policies of a Person, directly or indirectly, whether  through the ownership of shares or other securities, by contract or  otherwise, and “controlling” and “controlled” have corresponding meanings).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **“Agreed Oil Price”**              | means, as of any date a determination is made, an oil price forecast  utilized by the Facility Agent for the Additional Secured Facility, but in no  event reflecting oil prices higher than the most recently published World  Bank oil price forecast in constant dollars or, in the absence thereof, any  other oil price agreed upon by BPZ Exploración and the Facility Agents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **“Annual Monitoring Report**”      | means the report to be submitted to each of the Facility Agents in  form and substance reasonably satisfactory to the Facility Agents pursuant to  Section 6.16(f) (*Annual Monitoring Report*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Applicable S&E Law**”        | all applicable statutes, laws, ordinances, rules and regulations  of Peru, including without limitation, licenses, permits or other  governmental Authorizations setting standards concerning environmental,  social, labor, health and safety or security risks of the type contemplated  by the Performance Standards or imposing liability for the breach thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Approved Terms and Conditions**” | means, with respect to any Permitted Nueva Esperanza Credit Support: 

 

(a)                                 financial  terms, including fees, margin, interest rates and similar terms, negotiated  on an arm’s length basis; 

 

(b)                                term  of commitment or final maturity of credit not longer than one year; and 

 

(c)                                 if  any Permitted Nueva Experanza Credit Support remains outstanding at  March 15, 2009, establishment of a first priority Lien in favor of the  Borrowers on Nueva Esperanza’s interest in the GE Equipment and Services Sale  Contract, and such Lien is assigned to the Collateral Agent for the benefit  of the Lenders. |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Auditors**”                      | means PricewaterhouseCoopers or such other internationally reputable  firm of independent accountants acceptable to each of the Facility Agents as  the Borrowers may from time to time appoint as their auditors in accordance  with Section 6.5 (*Accounting/Auditors*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

3

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| “**Authorization**”             | means any consent, registration, legalization, filing, agreement,  notarization, certificate, license, approval, concession, permit, authority  or exemption from, by or with any Authority, whether given by express action  or deemed given by failure to act within any specified time period, and all  corporate, creditors’ and partners’ approvals, resolutions or consents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Authorized Representative**” | means any natural person who is duly authorized by each of the  Borrowers, as the case may be, to act on its behalf for the purposes  specified in, and whose name and specimen signature appear on, the  Certificate of Incumbency and Authority most recently delivered pursuant to  this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Authority**”                 | means any national, supranational, regional or local government or  governmental, administrative, fiscal, judicial, or government-owned body,  department, commission, authority, tribunal, agency or entity, or central  bank (or any Person, whether or not government owned and howsoever  constituted or called, that exercises the functions of a central bank)  competent to exercise jurisdiction in respect of any matter the subject of  this Agreement, any other Transaction Document and/or the transactions  contemplated thereby.                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Availability Period**”       | means: 

 

(i)                                    with respect to the IFC Loan  Agreement and the IFC Facility, the date from and including the date of the  IFC Loan Agreement to and including the date falling six (6) months  prior to the Final Maturity Date; and 

 

(ii)                                 with respect to the  Additional Secured Facility Agreement and the Additional Secured Facility,  the date from and including the date of the Additional Secured Facility  Agreement to and including the date falling six (6) months prior to the  Final Maturity Date. |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Base  Case”**                | means  the base case cash flow forecast derived from the Financial Model utilizing  the Base Case Assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ** **                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Base  Case Assumptions”**    | means  the assumptions and principles, including the Agreed Oil Price and Proved  Reserves criteria, utilized in establishing the Base Case, to be provided to  the relevant Facility Agent, in form and substance mutually agreed by the  Borrowers and the Facility Agents, pursuant to Section 4.1(n), and to be  utilized in the preparation of each updated Base Case pursuant to  Section 6.16(e)(ii) and the calculation of each Borrowing Base  Amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

4

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| **“Block  Z-1**”            | means  the approximate 740,000 acre area on the northwest coast of Peru identified  in the Block Z-1 License, as subject to reduction, if any, pursuant to the  relinquishment provisions of the Block Z-1 License.                                                                                                                                                                                                      |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Block  Z-1 License”**    | means  the agreement entitled “License Contract for Exploration and Exploitation of  Hydrocarbons” dated November 30, 2001, as amended and assigned on  January 23, 2003, March 18, 2004 and February 3, 2005, between  BPZ Exploración (formerly, BPZ Energy Inc., Sucursal Perú) and Perupetro, for  the exploration and exploitation of Block Z-1.                            |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Borrowing Base Amount**” | means,  for any Calculation Period, an amount (expressed in Dollars) equal to the  lower of: (i) the Loan-Life NPV divided by 1.8 and (ii) the  Field-Life NPV divided by 2.0.                                                                                                                                                                                                                                 |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Borrowing Base Assets**” | means  the Corvina Field and each other Petroleum Asset that is approved and  designated by the Facility Agents as a Borrowing Base Asset.                                                                                                                                                                                                                                                                               |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“BPZ  Resources”**        | means  BPZ Resources, Inc., a corporation incorporated under the laws of Texas.                                                                                                                                                                                                                                                                                                                                     |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Bureau  Veritas”**       | means  Bureau Veritas, international register of classification of vessels and  aircraft.                                                                                                                                                                                                                                                                                                                                |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Business Day**”          | means  a day on which banks are open for business in New York, New York and Lima,  Peru.                                                                                                                                                                                                                                                                                                                                 |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Calculation  Date”**     | means  each April 30 and October 31.                                                                                                                                                                                                                                                                                                                                                                           |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Calculation  Period”**   | means,  in respect of any Calculation Date, the following six (6) month period.                                                                                                                                                                                                                                                                                                                                     |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“CAO”**                   | means  the Compliance Advisor Ombudsman, the independent accountability mechanism  for IFC that impartially responds to environmental and social concerns of  affect communities and aims to enhance outcomes.                                                                                                                                                                                                           |
| ** **                            |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“CAO’s  Role”**      | means  (i) to respond to complaints by persons who have been or are likely to  be directly affected by the social or environmental impacts of IFC projects;  and (ii) to oversee audits of IFC’s social and environmental  performance, particularly in relation to sensitive projects, and to ensure  compliance with IFC’s social and environmental policies, guidelines,  procedures and systems. |

 

5

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| **“Cash  Balance”**                           | means,  on any date, the Borrowers’ cash balance in the Revenue Account that is free  of any Liens (other than Liens in favor of the Lenders).                                                                                                                                                                                     |
|---------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                              |                                                                                                                                                                                                                                                                                                                                    |
| “**Certificate of Incumbency and Authority**” | means  a certificate by the relevant Borrower in substantially the form as set out  in Exhibit B (*Form of Certificate  of Incumbency and Authority*).                                                                                                                                                                        |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| “**Certified Copy**”                          | means  (unless otherwise expressly provided) with respect to any agreement or  document, a copy of such agreement or document which has been certified by:                                                                                                                                                                              |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| ** **                                              | **(a)**                                 an  Authorized Representative of a Borrower; or                                                                                 |
| ** **                                              | ** **                                                                                                                                                                                                                                                                                                                              |
| ** **                                              | **(b)**                                to  the extent that such document relates to any Person (other than a Borrower),  by a duly authorized representative of such Person, |
| ** **                                              | ** **                                                                                                                                                                                                                                                                                                                              |
|                                                    | in each case, as being true, complete, correct  and in full force and effect (in each case, as of the date of such  certification).                                                                                                                                                                                                     |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| “**Change in Control**”                       | means  BPZ Resources ceases to own and hold, directly or indirectly, at least 100%  of all of the Economic Ownership Interests and Voting Rights of BPZ  Exploración.                                                                                                                                                              |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| “**Charter**”                                 | means  the Articles of Association and by-laws of each Borrower as contained in a  public deed.                                                                                                                                                                                                                                         |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| “**Coercive Practice**”                       | means  the impairing or harming, or threatening to impair or harm, directly or  indirectly, any party or the property of the party to influence improperly  the actions of a party.                                                                                                                                                     |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| “**Collateral Agency Agreement**”             | means  the agreement among the Borrowers, the Facility Agents and the Collateral  Agent, appointing the Collateral Agent to enter into certain Security  Documents and take actions thereunder for the benefit of the Lenders.                                                                                                          |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| **“Collateral  Agent”**                       | means  a financial institution, organized and existing under the laws of Peru,  reasonably acceptable to each Facility Agent.                                                                                                                                                                                                           |
| ** **                                              |                                                                                                                                                                                                                                                                                                                                    |
| “**Collusive Practice**”                      | means  an arrangement between two or more parties designed to achieve an improper  purpose, including to influence improperly the actions of another party.                                                                                                                                                                             |
|                                                    |                                                                                                                                                                                                                                                                                                                                    |
| **“Control”**                                 | means  the possession, directly or indirectly, by a person of the power to direct or  cause the direction of the management and/or affairs of another person in  ordinary and extraordinary matters (including restructuring of indebtedness,  amendment or                                                                             |

 

6

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| ** **                                    | replacement  of organizational documents and/or control of the composition of its board of  directors or equivalent body), through the ownership of voting securities or  the exercise of the rights of the managing member of such person (or of the  managing member of another person Controlling directly or indirectly such  person) or otherwise. To **Control** shall  be construed accordingly.                                                                                                                                                                                              |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **“Corporate  G&A Adjustment”** | means,  for any period, all selling, general and administrative expenses of the  Borrowers and other expenses necessary for the day-to-day operations of the  Borrowers but not included in operating expenses in the definition of “Net  Cash Flow”, exploration expenses, any capital expenditures or lease payments  payable by the Borrowers and not included in the calculation of “Net Cash  Flow”, any net cash payments to Nueva Esperanza and any amount paid in  respect of Permitted Partner Subordinated Loans (prior to any conversion  thereof to Participations). |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Corrupt Practice**”              | means  the offering, giving, receiving or soliciting, directly or indirectly, of  anything of value to influence improperly the actions of another party.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Corvina Field**”                 | means  the exploitation area in Block Z-1 identified as the “Corvina Field”.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **“Debt”**                          | With  respect to any Borrower, the aggregate of all obligations (whether actual or  contingent) of such Borrower, to pay or repay money including, without  limitation:                                                                                                                                                                                                                                                                                                                                                                                                                              |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                          | **(i)**                                    all  Financial Debt;                                                                                                                                                                                                                                                                                                                                                       |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                          | **(ii)**                                 the  aggregate amount then outstanding of all liabilities of any party to the  extent such Borrower guarantees them or otherwise directly or indirectly  obligates itself to pay them;                                                                                                                                                                                                      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                          | **(iii)**                              all  liabilities of such Borrower (actual or contingent) under any conditional  sale or a transfer with recourse or obligation to repurchase, including,  without limitation, by way of discount or factoring of book debts or  receivables; and                                                                                                                                                             |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                          | **(iv)**                             all  liabilities of such Borrower (actual or contingent) under its Charter, any  resolution of its partners, or any agreement or other document binding on  such Borrower to redeem any of its participations or quotas.                                                                                                                                                                                            |

 

7

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| **“Debt  to Equity Ratio”**          | means,  at any date of determination, the result obtained by dividing Debt (excluding  Permitted Partner Subordinated Loans) by Partners’ Equity (including  Permitted Partner Subordinated Loans).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Derivative Transaction**”         | means  any swap agreement, cap agreement, collar agreement, futures contract,  forward contract or similar arrangement with respect to interest rates,  currencies or commodity prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Disbursement**”                   | means  any disbursement of the Loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Disbursement Application**”       | means,  with respect to a request for any Disbursement, a notice given by the  Borrowers to the relevant Facility Agent requesting a Loan in accordance with  the terms of, and following the form as scheduled to, the relevant Loan  Agreement with respect to such Disbursement.                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Discount Rate**”                  | means  ten percent (10%) per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Dollars**” or “**US$**” | means  the lawful currency of the United States of America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**EBITDAX**”                        | means  earnings before interest, taxes, depreciation, amortization, and exploration  expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Economic  Ownership Interest”**   | means  the beneficial ownership interest in a person (which may include the right to  receive a share of dividends, profits and similar amounts distributed by such  person), which shall include any interest in any subordinated debt of the  person, held by another person or persons, directly or indirectly on a fully  diluted basis. For example and by way of illustration, if Company A were to  hold fifty percent (50%) of such ownership interests in Company B, and  Company B were to own sixty percent (60%) of such ownership interests in  Company C, then, for purposes of this definition, Company A would own an  Economic Ownership Interest in Company C of thirty percent (30%). |
| ** **                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Event of Default**”               | means  any one of the events or occurrences specified in Section 8.1 (*Events of Default*).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Facilities**”                     | means  the IFC Facility and, upon execution of an Accession Agreement with respect  thereto, the Additional Secured Facility; and “**Facility**”  means any of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| “**Facility Agent**”                 | means  IFC and the facility agent appointed for the Additional Secured Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

8

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| “**Facility Agreements**”     | means the IFC Loan Agreement and, upon the  execution of an Accession Agreement, the Additional Secured Facility  Agreement, and **“Facility Agreement”** means any  of them, as the context requires.                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Fee Letters**”             | means a letter or letters, as the case may be,  between any Finance Party and any Borrower setting out any of the fees, costs  and expenses to be paid by such Borrower to such party in connection with the  Finance Documents.                                                                                                                                                                                                                                                                                                           |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Field  Development Plan**” | means (a) with respect to the Corvina Field,  the field development plan prepared in accordance with the Block Z-1 License  and (b) with respect to any other Petroleum Asset, the field development  plan prepared in accordance with the License Contract relating to such  Petroleum Asset.                                                                                                                                                                                                                                   |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Field-Life NPV”**          | means, as at any date of determination, the  present value at the Discount Rate of the projected Net Cash Flow in Dollars  derived from the Proved Reserves of the Borrowing Base Assets, as certified  in the most recent Reserve Certification and calculated using the Proved Reserves,  the Agreed Oil Price and the other Base Case Assumptions, for the period  commencing on the day following such determination date through the longest  economic life of the Borrowing Base Assets as certified in such Reserve  Certification. |
| ** **                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Final Discharge Date**”    | means the date on which:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                    | (a)                                  the Borrowers have no further actual or contingent obligation to  make any payments to any of the Finance Parties under or pursuant to the  terms of any Finance Document; and                                                                                                                                                   |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                    | (b)                                 no Finance Party has any actual or contingent obligation under or  pursuant to the terms of any Finance Document.                                                                                                                                                                                                                      |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Final Maturity Date**”     | means the earlier of (i) December 15,  2012 and (ii) the Reserve Tail Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Finance Documents**”       | means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                    | (a)                                  this Agreement and each Accession Agreement;                                                                                                                                                                                                                                                                                     |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                    | (b)                                 each Facility Agreement;                                                                                                                                                                                                                                                                                                               |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                    | (c)                                  each Security Document;                                                                                                                                                                                                                                                                                                          |

 

9

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|                              | (d)                                 the Intercreditor Agreement;                                                                                                                                                                                                                                                                                                                                                                                                |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (e)                                  each Fee Letter; and                                                                                                                                                                                                                                                                                                                                                                                                  |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (f)                                    each other document from time to time designated a “Finance  Document” as agreed in writing between the Facility Agents and the Borrowers,                                                                                                                                                                                                                                                      |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | and “**Finance Document**”  means any of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| “**Finance Parties**”   | means the Facility Agents, the Lenders, the  Security Trustee and the Collateral Agent, and “**Finance  Party**” means any of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| “**Financial****Debt**” | means any indebtedness of any Borrower for or in  respect of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (i)                                     borrowed money;                                                                                                                                                                                                                                                                                                                                                                                     |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (ii)                                  the outstanding principal amount of any bonds, debentures, notes,  loan stock, commercial paper, acceptance credits, bills or promissory notes  drawn, accepted, endorsed or issued by any Borrower;                                                                                                                                                                                                                 |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (iii)                               the deferred purchase price of assets or services (except trade accounts  incurred and payable in the ordinary course of business to trade creditors  within ninety (90) days of the date they are incurred and which are not  overdue);                                                                                                                                                                                              |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (iv)                              non-contingent obligations of any Borrower to reimburse any other  person for amounts paid by that person under a letter of credit or similar  instrument (excluding any letter of credit or similar instrument issued for  the account of any Borrower with respect to trade accounts incurred and  payable in the ordinary course of business to trade creditors within 90 days  of the date they are incurred and which are not overdue); |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (v)                                 the amount of any obligation in respect of any Financial Lease;                                                                                                                                                                                                                                                                                                                                                             |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (vi)                              amounts raised under any other transaction having the financial  effect of a borrowing and which would be classified as a borrowing (and not  as an off-balance sheet financing) under the Accounting Standards;                                                                                                                                                                                                                             |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                              | (vii)                           the amount of any Borrower’s obligations under                                                                                                                                                                                                                                                                                                                                                                                                           |

 

10

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|                                 | Derivative Transactions  entered into in connection with the protection against or benefit from  fluctuation in any rate or price (but only the net amount owing by the  Borrower after marking the relevant derivative transactions to market);                                                                                                                                                             |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                 | (viii)                      any premium payable on a mandatory redemption or replacement of  any of the foregoing items; and                                                                                                                                                                        |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                 | (ix)                              the amount of any obligation in respect of any guarantee or  indemnity given by any Borrower for any of the foregoing items incurred by  any other person.                                                                |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Financial Lease**”      | means any lease or hire purchase contract which  would, under the Accounting Standards, be treated as a finance or capital  lease.                                                                                                                                                                                                                                                                           |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Financial Model**”      | means the financial model, in form and substance  satisfactory to the Facility Agents, prepared by the Borrowers for the  purposes of the financial projections of the Borrowers and the Project and  represented by material contained in or on computer discs and print outs as  deposited with each of the Facility Agents (as amended or varied from time to  time in accordance with the terms hereof). |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Financial Statements**” | means the financial statements (including a  balance sheet, income statement, changes in equity statement, cash flow  statement, accounting policies and explanatory notes) prepared quarterly or  annually (as the case may be) in accordance with the Accounting Standards  and, in each case, delivered pursuant to this Agreement.                                                                       |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Financial Year**”       | means the accounting year commencing each year on  January 1 and ending on the following December 31, or such other  period as the Borrowers may, with the prior written consent of the Facility  Agents, from time to time designate as their accounting year.                                                                                                                                    |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Flow Trust”**           | means the *fideicomiso de flujos*  covering all of the revenues and cash balances of the Borrowers to be  established with the Security Trustee for the benefit of the Lenders.                                                                                                                                                                                                                              |
| ** **                           |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**FPSO**”                 | means BPZ Exploración’s  registered floating production, storage and off-loading tanker facility and  its mooring system.                                                                                                                                                                                                                                                                          |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Fraudulent  Practice**” | means any action or omission,  including misrepresentation, that knowingly or recklessly misleads, or  attempts to mislead, a                                                                                                                                                                                                                                                                                |

 

11

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|                                                       | party to obtain a financial  benefit or to avoid an obligation.                                                                                                                                                                                                                                                                                    |
|------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**GE Equipment and  Services   Sale Contract**” | means the Contract for Sale of  Equipment and Services to be entered into between Nueva Esperanza and the consortium  of GE Packaged Power, Inc. and GE International Inc. Sucursal de Peru.                                                                                                                                                  |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**IFC Facility**”                               | means the revolving loan facility to be made  available by IFC to the Borrowers in an aggregate amount not exceeding US  $15,000,000 in accordance with the terms of, and subject to the conditions  of, this Agreement and the IFC Loan Agreement.                                                                                                |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**IFC Loans**”                                  | means the loans to be extended by IFC to the  Borrowers under the IFC Facility in accordance with the terms of, and subject  to the conditions of, this Agreement and the IFC Loan Agreement.                                                                                                                                                      |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**IFC Loan Agreement**”****                     | means the Loan Agreement of even date herewith  between the Borrowers and IFC.                                                                                                                                                                                                                                                                     |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**Import Duty Contract**”                       | means the Contrato de Fideicomiso en  Administracion y Garantia, dated August 31, 2007 among BPZ Exploración,  La Fiduciaria S.A., as trustee, Secrex, as beneficiary and Luis Rafael Zoeger  Nuñez, as depositary, as amended.                                                                                                     |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**Independent  Engineer**”                      | means Netherland, Sewell and Associates, Inc.  or such other engineering consultant selected by the Facility Agents.                                                                                                                                                                                                                          |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**Insurance  Adviser**”                         | means Progress Consultores de Seguros or such  other insurance adviser selected by the Facility Agents.                                                                                                                                                                                                                                            |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| “**Insurances**”                                 | means all contracts and policies of insurance and  reinsurance of any kind relating to the Borrowers taken out or, as the  context requires, to be taken out from time to time and maintained in  accordance with any Finance Document by or on behalf of the Borrowers, and “**Insurance**” means any of them, as the context requires. |
|                                                       |                                                                                                                                                                                                                                                                                                                                               |
| **“Intercreditor Agreement”**                    | means the intercreditor agreement to be entered  into by the Facility Agents and the Collateral Agent.                                                                                                                                                                                                                                             |
| ** **                                                 |                                                                                                                                                                                                                                                                                                                                               |
| **“Interest Cover”**                             | means, for any Calculation Period, the Borrowers’  actual and/or projected EBITDAX for such Calculation Period, divided by the  amount of all interest paid or payable in respect of any Financial Debt  (excluding Permitted Partner Subordinated Loans) during such Calculation  Period.                                                    |
| ** **                                                 |                                                                                                                                                                                                                                                                                                                                               |
| “**Interest Payment Date**”                      | means, in respect of any Loan, June 30 and  December 31 in                                                                                                                                                                                                                                                                               |

 

12

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|                             | each year.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Law**”              | means any law (including statutory and common  law), statute, constitution, decree, judgment, treaty, regulation, rule,  by-law, order, other legislative measure, directive, requirement, request or  guideline (whether or not having the force of law) of any governmental,  intergovernmental or supranational body, agency, local government, court or,  statutory, regulatory or self-regulatory (or similar) body or authority.                               |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Lenders**”          | means (i) IFC, and (ii) the Additional  Secured Facility Lenders, upon execution of the Additional Secured Facility  Agreement and an Accession Agreement; and “**Lender**”  means any of them, as the context requires.                                                                                                                                                                                                                         |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**Liabilities**”      | means the aggregate of all obligations of each of  the Borrowers to pay or repay money, including, without limitation:                                                                                                                                                                                                                                                                                                                                               |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (i)                                     Financial Debt;                                                                                                                                                                                                                          |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (ii)                                  the amount of all liabilities of the Borrowers  (actual or contingent) under any conditional sale or a transfer with recourse or obligation  to repurchase, including, without limitation, by way of discount or factoring  of book debts or receivables; |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (iii)                               taxes (including deferred taxes);                                                                                                                                                                                                                                          |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (iv)                              trade accounts incurred and payable in the ordinary course of business to trade  creditors (including letters of credit or similar instruments issued for the  account of the Borrowers with respect to such trade accounts);                                                     |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (v)                                 accrued expenses, including wages and other  amounts due to employees and other services providers;                                                                                                                                                              |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (vi)                              the amount of all liabilities of the Borrowers howsoever arising to  redeem any of their Participations; and                                                                                                                                                                      |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                             | (vii)                           to the extent (if any) not included in the definition of Financial Debt, the  amount of all liabilities of any person to the extent any Borrower guarantees  them or otherwise obligates itself to pay them.                                                                                       |
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| “**License Contract**” | means each license contract entered into by BPZ  Exploración with Perupetro with respect to a Borrowing Base Asset pursuant to  Peruvian Law No. 26221.                                                                                                                                                                                                                                                                                                    |

 

13

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| “**Lien**”                                                  | means any mortgage, pledge, encumbrance, charge,  assignment, hypothecation, security interest, title retention, preferential  right, trust arrangement, right of set-off, counterclaim or banker’s lien,  privilege or priority of any kind having the effect of security, any  designation of loss payees or beneficiaries or any similar arrangement under  or with respect to any insurance policy or any preference of one creditor  over another arising by operation of Law.                                                                                                                                                                                                                                   |
|-----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Life of Field Coverage Ratio”   or “LOF”**     | means, as at any date of determination, the ratio  obtained by dividing (i) the sum of (A) the present value at the  Discount Rate of the projected Net Cash Flow in Dollars derived from the  Proved Reserves of the Borrowing Base Assets, as certified in the most recent  Reserve Certification and calculated using the Proved Reserves, the Agreed  Oil Price and the other Base Case Assumptions, for the period commencing on  the day following such determination date through the longest economic life  of the Borrowing Base Assets as certified in such Reserve Certification, less  (B) the Corporate G&A Adjustments by (ii) the outstanding Net  Financial Debt of the Borrowers. |
| ** **                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Life of Loan Coverage Ratio”****or** “**LOL**” | means, as at any date of determination, the ratio  obtained by dividing (i) the sum of (A) the present value at the  Discount Rate of the projected Net Cash Flow in Dollars derived from the  Proved Reserves of the Borrowing Base Assets, as certified in the most recent  Reserve Certification and calculated using the Proved Reserves, the Agreed  Oil Price and the other Base Case Assumptions, for the period commencing on  the day following such determination date up to and including the Final  Maturity Date, less (B) the Corporate G&A Adjustment by  (ii) the outstanding Net Financial Debt of the Borrowers.                                                                 |
| ** **                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Loan-Life NPV”**                                         | means, as at any date of determination, the  present value at the Discount Rate of the projected Net Cash Flow in Dollars  derived from the Proved Reserves of the Borrowing Base Assets, as certified  in the most recent Reserve Certification and calculated using the Proved  Reserves, the Agreed Oil Price and the other Base Case Assumptions, for the  period commencing on the day following such determination date up to and  including the Final Maturity Date.                                                                                                                                                                                                                                                |
| ** **                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Loans**”                                                 | means the IFC Loans and the Additional Secured  Facility Loans, and “**Loan**” means  any of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Material Adverse Effect**”                               | means a material adverse effect on:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                  | (i)                                     the Borrowers, their assets or properties, taken as a                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

14

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|                                             | whole;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                             | (ii)                                  the Borrowers’ business, results of operations or financial  condition, taken as a whole;                                                                                                                                                                                                                                                                                                                        |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                             | (iii)                               the implementation of the Project or the carrying on of the  Borrowers’ operations; or                                                                                                                                                                                                                                                                                                                                            |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                             | (iv)                              the ability of the Borrowers to comply with their obligations  under this Agreement or any other Transaction Document.                                                                                                                                                                                                                                                                                                                        |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| “**Maximum Available Amount**”         | means, as of any date of determination, an  amount (expressed in Dollars) equal to the lesser of: (i) the Borrowing  Base Amount less outstanding Financial Debt of the Borrowers (excluding  Permitted Partner Subordinated Loans), and (ii) the aggregate Maximum  Facility Amounts less outstanding Loans.                                                                                                                                                                                                                                                                                                          |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| “**Maximum Facility Amount**”          | means, with respect to any Facility as of any date  of determination, the maximum available amount of such Facility at such date  as set forth in Schedule 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **“Minimum Levels”**                   | means, at any date, 2.5 with respect to Interest  Cover, 1.8 with respect to the LOL and 2.0 with respect to the LOF.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **“Net Cash Flow” or “NCF”** | means, for any period, the sum, on a consolidated  basis, of (i) all proceeds received or projected to be received from the  sale of the Borrowers’ share (other than solely in the capacity as operator)  of oil production from the Borrowing Base Assets, minus (ii) the  Borrowers’ share of operating costs, transportation costs, cash contributions  as required under the Block Z-1 License and any other License Contract,  taxes, royalties, capital expenditures and expenses in respect of Financial  Debt (whether interest or other fees and charges) paid or payable during the  same period. |
| ** **                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **“Net Financial Debt”**               | means, as of any date of determination, the sum,  on a consolidated basis, of (i) outstanding Financial Debt (excluding  Permitted Partner Subordinated Loans) of the Borrowers and all amounts then  owing in respect of such Financial Debt of the Borrowers (including overdue  interest thereon), less (ii) Cash Balances, plus  (iii) the net proceeds of Loans received or projected to be received  (less Loans repaid or projected to be repaid) by the Borrowers included in  the calculation of Net Cash Flow at such date of determination.                                                            |
| ** **                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **“Nueva Esperanza”**                  | means Empresa Eléctrica Nueva Esperanza S.R.L., a  company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

15

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| ** **                                    | incorporated under the laws of Peru.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Nuevos Soles” or “S”** | means the lawful currency of Peru.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Obstructive  Practice**”         | means:  (i) deliberately destroying,  falsifying, altering or concealing of evidence material to the investigation  or making of false statements to investigators, in order to materially impede  a World Bank Group investigation into allegations of a Corrupt Practice, Fraudulent Practice, Coercive Practice or Collusive Practice,  and/or threatening, harassing or intimidating any party to prevent it from  disclosing its knowledge of matters relevant to the investigation or from pursuing  the investigation, or (ii) acts intended to materially impede the  exercise of IFC’s access to contractually required information in  connection with a World Bank Group investigation into allegations of a Corrupt Practice, Fraudulent Practice, Coercive  Practice or Collusive Practice. |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| “**Official**”                      | means any officer of a political party or  candidate for political office in any country of a Borrower or any officer or  employee:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                          | (a)                                  of the government of any such country (including any legislative,  judicial, executive or administrative department, agency or instrumentality  thereof); or                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                          | (b)                                 of a public international organization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Offtake Agreements”**            | means all current and future contracts with  respect to the Corvina Field and any other Borrowing Base Assets between BPZ  Exploración and an Offtaker.  For the  avoidance of doubt, the definition of Offtake Agreements shall not include  the Permitted License Transfers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Offtaker”**                      | means Petroperu or any other offtaker, under  any current or future contracts with respect to the Corvina Field and any  other Borrowing Base Assets, acceptable to each Facility Agent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Participations”**                | means all the quotas (*participaciones*)  in each of the Borrowers from time to time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Participations Pledge”**         | means the *garantía mobiliaria*  covering 100% of the Participations granted in favor of the Collateral Agent  for the benefit of the Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Partners’ Equity”**         | means, with respect to any Borrower, the aggregate  of:

 

(i)                                     the amount paid up on the equity  capital of such                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

16

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| ** **                                                   | Borrower; and
 
(ii)                                  the amount standing to the  credit of the reserves of such Borrower (including, without limitation, any  participation premium account, capital redemption reserve funds and any  credit balance on the accumulated profit and loss account);
 

after deducting from that aggregate (A) any  debit balance on the profit and loss account or impairment of the issued  equity capital of such Borrower (except to the extent that deduction with respect  to that debit balance or impairment has already been made), (B) amounts  set aside for dividends or taxation (including deferred taxation), and  (C) amounts attributable to capitalized items such as goodwill,  trademarks, deferred charges, licenses, patents and other intangible assets. |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Performance Standards**”                        | means IFC’s Performance Standards on  Social & Environmental Sustainability, dated April 30, 2006,  copies of which have been delivered to and receipt of which has been  acknowledged by the Borrowers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Permitted Additional  Unsecured Indebtedness”** | means  unsecured Financial Debt of one or both of the Borrowers which, after giving  effect to the utilization in full of the Loans and the incurrence of such  Financial Debt, would result in the LOF, LOL and Interest Cover being no less  than the Minimum Levels and the Debt to Equity Ratio being no greater than  65:35.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “**Permitted Financial Debt**”                     | means Financial Debt of the Borrowers with respect  to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         | (a)                                       the IFC Loans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         | (b)                                      the Additional Secured Facility Loans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         | (c)                                       Permitted Partner Subordinated Loans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         | (d)                                      Permitted Additional Unsecured Indebtedness; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         | (e)                                       Permitted Performance Bonds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **“Permitted Import Duty Liens”**                  | means Liens  in favor or for the benefit of Secrex created under the Import Duty Contract  or otherwise securing the import duties referred to in the Import Duty  Contract in an aggregate amount not exceeding $3,950,000 until such time as  such import duties are paid in full to the relevant Peruvian customs Authority  or such import duties are no longer due and payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

17

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| ** **                                                | to the  relevant Peruvian customs Authority.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Permitted License Transfers”**               | means any  transfer to Affiliates of BPZ Exploración of license agreements for Blocks  XIX, XXII, and XXIII that are not Borrowing Base Assets.                                                                                                                                                                                                                                                                                                                                       |
| ** **                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Permitted Liens**”                           | means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (a)                                  the Security;                                                                                                                                                                                                                                                                    |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (b)                                 Liens on equipment in favor of the sellers of such equipment to  the Borrowers with an aggregate purchase price not exceeding the equivalent  of ten million Dollars (US$10,000,000);                                                                                                  |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (c)                                  any Lien arising from any tax, assessment or other governmental  charge or other Lien arising by operation of law, in each case if the  obligation underlying any such Lien is not yet due or, if due, is being  contested in good faith by appropriate proceedings so long as:  |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (i)                         those proceedings do not involve any substantial danger of the  sale, forfeiture or loss of any part of the Project, title thereto or any  interest therein, nor interfere in any material respect with the use or  disposition thereof or the implementation of the Project or the carrying on  of the business of the Borrowers; and |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (ii)                      the Borrowers have set aside adequate reserves sufficient to  promptly pay in full any amounts that the Borrowers may be ordered to pay on  final determination of any such proceedings;                                                                                                                                                                |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (d)                                 the Permitted Import Duty Liens; and                                                                                                                                                                                                                                                   |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | (e)                                  Liens consisting of cash collateral securing Permitted Performance  Bonds;                                                                                                                                                                                                       |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                      | and “**Permitted Lien**”  means any of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Permitted Nueva  Esperanza Credit Support**” | has the meaning set forth in Section 2.1.                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| “**Permitted Partner   Subordinated Loans**”    | means unsecured loans made available by BPZ  Resources or any of its Affiliates to one or both of the Borrowers prior to  or during the term of this Agreement, subordinated in right of                                                                                                                                                                                                                                                                                                   |

 

18

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|                                         | payment and upon liquidation to the Loans pursuant  to the Subordination Agreement, with permitted gross payments thereunder  (including any deduction or withholding in respect thereof and any other  charges or expenses relating thereto) not exceeding (a) US$6,000,000 in  any semi-annual period and (b) US$12,000,000 in any Financial Year,  payable at such time as permitted under the Subordination Agreement.                                                                  |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Permitted Performance  Bonds”** | means performance bonds, surety bonds or letters  of credit in an aggregate principal amount not exceeding US$10,000,000 issued  in the ordinary course of business on the Borrowers’ behalf to secure the  performance of obligations under a License Contract, other Project Document  or other obligation incurred in the ordinary course of the Borrowers’  operations.                                                                                                            |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Person**”                       | means any person, firm, company, corporation,  government, state or agency of a state or any association, trust or  partnership (whether or not having separate legal personality) or two or more  of the foregoing, and references to a “**Person**”  include its successors and permitted assigns.                                                                                                                                                                                        |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Peru**”                         | means the Republic of Peru.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Perupetro**”                    | means Perupetro S.A., a private law state company  established under the Peruvian Organic Law for Hydrocarbons No. 26221  (1993).                                                                                                                                                                                                                                                                                                                                                                |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Petroleum Asset**”              | means any exploitation area in Peru containing  hydrocarbon accumulations with respect to which BPZ Exploración has entered  into a License Contract with Perupetro ((x) only to the extent of its  rights and interest thereunder and (y) only to the extent its rights and  interest therein have not been transferred pursuant to the Permitted License  Transfers), approved by a Supreme Decree of the Government of Peru, for the  exploration and exploitation of hydrocarbons. |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Petroperu”**                    | Petróleos del Perú -  Petroperu S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Potential Event of  Default**”  | means any event or circumstance which would, with  notice, lapse of time, the making of a determination or any combination  thereof, become an Event of Default.                                                                                                                                                                                                                                                                                                                                      |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Project**”                      | has the meaning set forth in Section 2.1 (*The Project*).                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| “**Project Documents**”            | means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                         | (a)                                       the Block Z-1 License;                                                                                                                                                                                                                                        |

 

19

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|                                       |   | (b)                                      with respect to Petroleum Assets that have been designated as  Borrowing Base Assets, each License Contract relating thereto;                        |
|--------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (c)                                       each Offtake Agreement;                                                                                                                        |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (d)                                      Bareboat Charter, dated June 13, 2007, between SurPacifiCo,  L.L.C. and BPZ Exploración;                                                   |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (e)                                       Drilling Contract, dated December 24, 2005, between BPZ  Exploración and Petrex S.A.;                                                |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (f)                                         Drilling Contract, dated May 19, 2008, between BPZ  Exploración and Petrex S.A.;                                         |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (g)                                      Master Service Agreement, dated January 1, 2008, between  Tecnomarine S.A.C. and BPZ Exploración;                                          |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (h)                                      Time Charter Agreement, dated January 1, 2008, between  Tecnomarine S.A.C. and BPZ Exploración;                                            |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (i)                                          Vessel Operation Agreement, dated January 1, 2008, between  Tecnomarine S.A.C. and BPZ Exploración;                |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (j)                                          Master Service Agreement, dated January 1, 2008, between  Alpha Marine S.A.C. and BPZ Exploración;                 |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (k)                                       Vessel Operation Agreement, dated January 1, 2008, between  Alpha Marine S.A.C. and BPZ Exploración;                                 |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (l)                                          Oil Well Test and Oil Operation Agreement, dated August 28,  2007, between Sertecpet S.A. and BPZ Exploración; and |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | (m)                                    each other document from time to time designated a “Project  Document” as agreed in writing between the Facility Agents and the Borrowers,             |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                       |   | and “**Project Document**”  means any of them, as the context requires.                                                                                                                                                                                                                                                                                                      |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
| “**Proved Developed  Reserves**” |   | means, as of  any date of determination, Proved Reserves that are expected to be recovered  from existing wells and installed facilities.                                                                                                                                                                                                                                              |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                                   |
| “**Proved  Reserves**”           |   | means, as of any date of  determination with respect to Borrowing Base Assets, the estimated quantities  of hydrocarbons which geological and engineering data                                                                                                                                                                                                                         |

 

20

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|                                   |   | demonstrate with reasonable  certainty to be recoverable in future years from known reservoirs under  existing economic and operating conditions. Proved Reserves are limited to  those quantities of hydrocarbons which can be estimated, with reasonable  certainty, to be recoverable commercially at current prices and costs, under  existing regulatory practices and with existing conventional equipment and  operating methods (taking into account applicable Laws to which BPZ  Exploración is subject).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|----------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Reduction  Date**”        |   | means each Interest Payment Date, commencing with the Interest Payment  Date falling on December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Reserve  Certification**” |   | means the certification of any or  all of the Proved Reserves and Proved Developed Reserves prepared from time  to time by the Independent Engineer in accordance with the Guidelines of the  Society of Petroleum Engineers (SPE), including projected capital  expenditures, operating expenses, annual production profiles and the economic  life of the Borrowing Base Assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Reserve Tail Date**”      |   | means, as of any date of determination and  based on the then most recent Reserve Certification, the latest Interest  Payment Date following which at least twenty-five percent (25%) of Proved  Reserves are expected to be produced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Revenue Account**”        |   | means the bank account entitled “collection  account” (*cuentas de recaudación)*(or as it is  otherwise entitled in the agreement creating the Flow Trust) established with  the Security Trustee in the name of the trust created under the Flow Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Rollover Loan**”          |   | means a Loan under a Facility:

 
**(i)**                                     made or to be made on an  Interest Payment Date;
 
**(ii)**                                  the aggregate amount of which  is equal to all maturing Loans (or, if the Borrowers intend to repay a  portion of such maturing Loans, the unpaid portion of such Loans) under such  Facility on such Interest Payment Date, but in no event greater than the  Maximum Facility Amount for such Facility; and
 
**(iii)**                               the proceeds of which are  applied to refinance the maturing Loans under such Facility on such Interest  Payment Date. |
|                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| “**Rollover  Request**”      |   | has the meaning set forth in  Section 3.3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

21

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| “**Sanctionable Practice**”      |   | means any Corrupt Practice, Fraudulent  Practice, Coercive Practice, Collusive Practice, or Obstructive Practice, as  those terms are defined herein and interpreted in accordance with the  Anti-Corruption Guidelines attached to this Agreement as Schedule 2.                                                                                                    |
|--------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**S&EA**”                   |   | means the social and environmental  assessment, dated April 2008, prepared by the Borrowers in accordance with  the Performance Standards.                                                                                                                                                                                                                      |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**S&E Management  System**” |   | means the Borrowers’ social and  environmental management system enabling it to identify, assess and manage  Project risks on an ongoing basis.                                                                                                                                                                                                                 |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**Secrex**”                     |   | means Secrex Compañia de Seguros de Crédito  y Garantia.                                                                                                                                                                                                                                                                                                   |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**Security**”                   |   | means the security created or agreed to be  created by or pursuant to the Security Documents to secure all amounts owing  by the Borrowers to the Finance Parties under the Finance Documents.                                                                                                                                                                       |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**Security Documents**”         |   | means the documents providing for the  Security consisting of:                                                                                                                                                                                                                                                                                                       |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | (a)                                  the Participations Pledge;                                                                                                                                 |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | (b)                                 the Flow Trust;                                                                                                                                                  |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | (c)                                  the Subordination Agreement;                                                                                                                               |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | (d)                                 the Collateral Agency Agreement; and                                                                                                                             |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | **(e)**                                  each other document from time to time  designated a “Security Document” as agreed in writing between the Facility  Agents and the Borrowers, |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
|                                       |   | and “**Security Document**”  means any one of them, as the context requires.                                                                                                                                                                                                                                                                               |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**Security Trustee**”           |   | means a financial or fiduciary  institution, organized and existing under the laws of Peru, reasonably  acceptable to each Facility Agent.                                                                                                                                                                                                                           |
|                                       |   |                                                                                                                                                                                                                                                                                                                                                                 |
| “**Shell Farm-Out Agreement**”   |   | means the farm-out agreement contemplated  by, and consistent with the terms set forth in, the Memorandum of  Understanding dated June 25, 2008 between Shell Exploration Company  (West) B.V. and BPZ Exploración.                                                                                                                                        |

 

22

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| “**Subordination Agreement**” |   | means the Subordination and Pledge  Agreement to be entered into by BPZ Energy Inc. and any Affiliate thereof  providing a Permitted Partner Subordinated Loan in form and substance  satisfactory to the Facility Agents.                                                                                                                                                                                                                                                                                                                     |
|-----------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| “**Subsidiary**”              |   | means, with respect to any entity, any  other entity over fifty percent (50%) of whose capital is owned, directly or  indirectly, by such entity or which is otherwise effectively controlled by  such entity.                                                                                                                                                                                                                                                                                                                                 |
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| “**Transaction Documents**”   |   | means:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                    |   | (a)                                  each Finance Document; and                                                                                                                                                                                                                                                                                                           |
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                    |   | (b)                                 each Project Document,                                                                                                                                                                                                                                                                                                                     |
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                    |   | and “**Transaction Document**” means any  of them, as the context requires.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **“Voting Rights”**           |   | means, with respect to any person, the  rights, directly or indirectly, held by such person to vote on or cause the  direction of the management and policies of each Borrower in ordinary and  extraordinary matters (to the extent that it has such rights regarding  extraordinary matters on the date of this Agreement) through the ownership of  voting securities or the exercise of the rights of the managing member of  such person (or of the managing member of any other person Controlling  directly or indirectly such person). |
| ** **                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| “**World Bank**”              |   | means the International Bank for  Reconstruction and Development, an international organization established by  Articles of Agreement among its member countries.                                                                                                                                                                                                                                                                                                                                                                              |

 

1.3                                 **Interpretation**

 

In this Agreement:

 

### **(a)**                                  unless the context otherwise requires, wordsdenoting the singular include the plural and vice versa;

### ** **

### **(b)**                                 a reference to a specified Article, Section,Schedule or Exhibit shall be construed as a reference to that specifiedArticle or Section of, or Schedule or Exhibit to, thisAgreement;

### ** **

### **(c)**                                  a reference to an agreement shall beconstrued as a reference to such agreement as it may be amended, varied,supplemented, novated or assigned from time to time but disregarding anyamendment, variation, supplement, novation or assignment made in breach of thisAgreement;

 

23

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### **(d)**                                 a reference to any party to any documentincludes that party’s successors and permitted assigns;

### ** **

### **(e)**                                  the headings and the Table of Contents areinserted for convenience of reference only and shall not affect theinterpretation of this Agreement;

### ** **

### **(f)**                                    “include”, “includes” and “including” shallbe respectively construed as “include without limitation”, “includes withoutlimitation” and “including without limitation”, and all derivative terms shallbe construed accordingly;

### ** **

### **(g)**                                 when an Interest Payment Date (or other datefor payment) is not a Business Day, such Interest Payment Date (or other date)shall be automatically changed to the next Business Day in that calendar month(if there is one) or the preceding Business Day (if there is not).

 

**2.****                                      THEPROJECT**

 

2.1                                 **The Project**

## *** ***

The project consists of the ongoing development andoperation of the Corvina Field in Block Z-1 and additional Petroleum Assets(the “**Project**”), including related capitalexpenditures, working capital requirements and debt repayment requirementsrelating thereto.  In addition, althoughthe Nueva Esperanza gas to power project is excluded from the definition of“Project”, the Borrowers may provide credit support, whether through loans,guarantees or other extension of credit, for the benefit of their affiliatedcompany, Nueva Esperanza, in an amount not exceeding US$90,000,000, with theinitial payment of interest to be deferred until January 1, 2009 andotherwise on Approved Terms and Conditions, pursuant to documentationreasonably satisfactory to the Facility Agents (“**PermittedNueva Esperanza Credit Support**”).

 

2.2                                 **Facilities**

## *** ***

### **(a)**                                  Subject to the terms and conditions of thisAgreement and the Facility Agreements:

### ** **

#### **(i)**                                     IFC shall make available to the Borrowers theIFC Facility; and

#### ** **

#### **(ii)**                                  upon execution of an Accession Agreement, theAdditional Secured Facility Lenders shall make available to the Borrowers the AdditionalSecured Facility.

#### ** **

### **(b)**                                 The obligations of each Finance Party underthe Finance Documents are several. Failure of a Finance Party to perform its obligations under the FinanceDocuments does not affect the obligations of any other party under the FinanceDocuments.  No Finance Party isresponsible for the obligations of any other Finance Party under the FinanceDocuments.

 

24

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### **(c)**                                  No Finance Party is bound to monitor orverify the application of any amount borrowed pursuant to the FinanceDocuments.

### ** **

### **(d)**                                 Notwithstanding any other provision of thisAgreement or the Facility Agreements, no Lender shall be obligated to makeavailable any Loan at any time after the expiration of the Availability Periodunder the relevant Facility Agreement or, if earlier, the date on which suchLender ceases to have any commitment to make available Loans under the relevantFacility Agreement.

### ** **

2.3**                                 Borrowers’Obligations Joint and Several**

## *** ***

The Borrowers’ obligations under the Finance Documentsare joint and several.

 

# **3.**                                      LOANS

# ** **

3.1**                                 Disbursements**

## *** ***

### **(a)**                                  Subject to Section 4 (*Conditions Precedent*) and paragraph (b) below of thisSection 3.1, the Loans shall be disbursed by each of the Lenders inaccordance with, and subject to, the Facility Agreement under which any suchLoan is disbursed; *provided* thatin no event shall the Borrowers at any time request Disbursements of Loans inan aggregate amount exceeding the Maximum Available Amount.

### ** **

### **(b)**                                 No Lender shall be responsible to the Borrowersfor any failure by any other Lender to make a Disbursement.

### ** **

3.2                                 **Repayment**

## *** ***

Subject to Section 1.3(g), the Borrowers shallrepay each Loan in full on the Interest Payment Date immediately following thedate of Disbursement of such Loan.

 

3.3                                 **Rollover Loans**

## *** ***

Subject to the terms and conditions of this Agreementand the relevant Facility Agreement, on each Interest Payment Date, theBorrowers shall be conclusively deemed to have delivered to each FacilityAgent, respectively, a duly completed request for Disbursement of a RolloverLoan (each, a “**Rollover Request**”) under therelevant Facility in an aggregate amount equal to the outstanding Loans undersuch Facility, unless (i) not later than ten (10) Business Days priorto such Interest Payment Date, the Borrowers have notified IFC and the FacilityAgents in writing that the Borrowers will repay all or a portion of the Loansmaturing on such Interest Payment Date or (ii) an Event of Default orPotential Event of Default has occurred and is continuing.  Notwithstanding the foregoing, each RolloverRequest shall be automatically adjusted such that (i) the Rollover Loansrequested thereunder do not exceed the Maximum Available Amount and(ii) with respect to each Facility, the Rollover Loans requested thereunderdo not exceed the Maximum Facility Amount for such Facility.

 

25

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3.4**                                 Reduction**

## *** ***

On each Reduction Date, the Borrowers shall repay allor a portion of the outstanding Loans under each Facility in an amountsufficient to ensure that at all times the aggregate outstanding amount ofLoans under such Facility does not exceed the Maximum Facility Amount for suchFacility.

 

3.5                                 **Mandatory Prepayments for Illegality; Insurance Events**

## *** ***

The Borrowers shall prepay all or a portion of theoutstanding Loans with respect to the relevant Facility or Facilities (as thecase may be):

 

### **(a)**                                  in accordance with the relevant FacilityAgreement if it becomes unlawful for a Lender (or a participant in a Loan) tocontinue to maintain or fund any Loan (or participation therein); and

### ** **

### **(b)**                                 in accordance withSection 6.11(c) (*Insurance*),

### ** **

in each case, whereupon all undisbursed portions ofsuch Facility or Facilities (as the case may be) shall be immediatelycancelled.

 

3.6                                 **Mandatory Prepayments to Achieve Minimum Levels**

## *** ***

If at any time any of the LOF, the LOL or InterestCover is less than the Minimum Level therefor, the Borrowers shall prepay allor such portion of all outstanding Loans, *prorata* among all Facilities, in an amount sufficient to ensure thateach of the LOF, the LOL and Interest Cover are equal to or greater than theMinimum Level therefor.  Such prepaymentshall be made within thirty (30) days after the date such non-compliance withthe relevant Minimum Level(s) is first determined.

 

3.7**                                 VoluntaryPrepayments**

## *** ***

The Borrowers shall have the right to voluntarilyprepay all or part of the principal amount of any Loan then outstanding inaccordance with, and subject to, the terms of the Facility Agreement underwhich such Loan was made.

 

3.8**                                 GeneralPrepayment Terms**

## *** ***

### **(a)**                                  All mandatory or voluntary prepayments(including pursuant to Section 3.4 (*Reduction*),Section 3.5 (*Mandatory Prepayments for Illegality;Insurance Events*), Section 3.6 (*MandatoryPrepayments to Achieve Minimum Levels*) and Section 3.7 (*Voluntary Prepayments*)) with respect toany Facility shall be made together with payment of (i) any premiumrequired under the Facility Agreement for such Facility, (ii) all accruedinterest on the principal amount of the Loans to be prepaid, and (iii) allcosts and expenses, losses and all other amounts then due and payable underthis Agreement and the relevant Facility Agreement.

 

26

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### **(b)**                                 Any amounts of the Loans with respect to anyFacility mandatorily prepaid by the Borrowers (including pursuant toSection 3.4 (*Reduction*), Section 3.5 (*Mandatory Prepayments for Illegality; Insurance Events*) orSection 3.6 (*Mandatory Prepayments to Achieve MinimumLevels*) other than with respect to Interest Cover) may not bereborrowed.

### ** **

### **(c)**                                  In the event the Borrowers make a voluntaryprepayment of any Loans under a Facility (including pursuant toSection 3.7 (*Voluntary Prepayments*)), theBorrowers shall, at the same time, make a corresponding prepayment under eachother Facility, so that the same proportion of the Loans under each Facility isprepaid, unless such corresponding prepayment is waived in accordance with theterms of the Facility Agreement for such other Facility.

### ** **

3.9**                                 Cancellationby Borrowers**

## *** ***

### **(a)**                                  The Borrowers shall have the right to cancelall or part of any undisbursed portion of each Facility in accordance with, andsubject to, the terms of the Facility Agreement relating to such Facility.

### ** **

### **(b)**                                 To the extent the Borrowers cancel all orpart of any undisbursed portion of any Facility, the Borrowers shall, at thesame time, make a corresponding cancellation of all or part (as the case maybe) of the undisbursed portion of each other Facility, so that the sameproportion of the undisbursed portion of each Facility is cancelled, unlesssuch corresponding cancellation is waived in accordance with the terms of theFacility Agreement for any such other Facility.

### ** **

### **(c)**                                  If the Borrowers cancel the undisbursedportion of any Facility in part, the cancelled portion of such Facility shallbe allocated to reduce the Maximum Facility Amount of such Facility *pro**rata* across theperiods set forth in Schedule 1.

### ** **

# **4.**                                      CONDITIONS PRECEDENT

# ** **

4.1**                                 FirstDisbursement under each Facility**

## *** ***

The obligation of each Lender to make the firstDisbursement under such Lender’s Facility shall be subject to the priorfulfilment (in each case, in form and substance satisfactory to the relevantFacility Agent), or the prior waiver in whole or in part by the relevant FacilityAgent, as the case may be, of the following conditions precedent:

 

27

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### **(a)**                                  FinanceDocuments

### ** **

#### **(i)**                                     The relevant Facility Agent shall havereceived originals of each of the Finance Documents, duly executed by eachPerson expressed to be party thereto.

#### ** **

#### **(ii)**                                  Each of the Finance Documents shall havebecome (and remain as at the date proposed as the date of first Disbursementunder such Facility) fully and unconditionally effective in accordance with itsrespective terms.

#### ** **

### **(b)**                                 ProjectDocuments

### ** **

#### **(i)**                                     The relevant Facility Agent shall havereceived originals or Certified Copies of each Project Document, duly executedby each Person expressed to be party thereto.

#### ** **

#### **(ii)**                                  Each of the Project Documents shall havebecome (and remain as at the date proposed as the date of first Disbursementunder such Facility) fully and unconditionally effective in accordance with itsrespective terms.

#### ** **

### **(c)**                                  Security

### ** **

The Security shall have been:

 

(i)  validly created and perfected as first-rankingLiens, and

 

(ii) the relevant Facility Agent shall havereceived duly executed originals of each of the Security Documents, togetherwith any document, recording, filing, notification, registration, notarizationor other evidence required for the creation, validity, perfection or priorityof the Liens as first-ranking Liens in favor of the Lenders in or under suchSecurity Documents;

 

provided,that, with respect to the first Disbursement of the IFC Loans, (i) theLiens created under the Flow Trust and the Participations Pledge shall not berequired to have been perfected so long as the relevant filings forregistration and perfection of such Liens shall have been made with the Movable Registry of Contracts (*Registro Mobiliario de Contratos)* in Peru and (ii) withrespect to the Flow Trust, the Borrowers’ revenues shall continue to be paid tothe trust established under the Import Duty Contract until the proceeds of thefirst Disbursement of the IFC Loans have been applied in accordance with Section 4.4(f)(i)(z) andPetroperu has been notified to commence payments to the Flow Trust inaccordance with Section 6.12*.*

 

### **(d)**                                 Charters

### ** **

The relevantFacility Agent shall have received a true, complete and up to date CertifiedCopy of the Charter of each Borrower.

 

28

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### **(e)**                                  ParticipationRegisters

### ** **

**The relevant Facility Agent shall havereceived a Certified Copy of the registration entry in the public registry ofeach Borrower showing all current holders of Participations of such Borrowerand the respective ownership interest in such Borrower.**

 

### **(f)**                                    CorporateAuthorizations

### ** **

**The relevant Facility Agent shall havereceived Certified Copies of all corporate (including, if required, partner)Authorizations and other approvals necessary for the due execution, deliveryand performance of the Finance Documents and for the transactions contemplatedthereby, and any other documents in implementation thereof, by each Borrower(together with the Authorizations of the Persons signing the Finance Documentsfor and on behalf of each Borrower).**

 

### **(g)**                                 Certificate ofIncumbency and Authority

### ** **

**The relevant Facility Agent shall havereceived a Certificate of Incumbency and Authority of each Borrower.**

 

### **(h)**                                 Governmentaland Other Approvals

### ** **

**The Borrowers have provided to the relevantFacility Agent, Certified Copies of all Authorizations listed in Section 1(*Authorizations Already Obtained*) andSection 2 (*Authorizations to be Obtained Prior to FirstDisbursement*) of Schedule 3 (*Authorizations*),together with all other Authorizations not listed in those Sections that maybecome necessary for (i) **eachLoan (including the borrowing by the Borrowers under this Agreement and theFacility Agreements); (ii) the business of the Borrowers as presentlycarried on and as contemplated to be carried on; (iii) the Project;(iv) the due execution, delivery, validity and enforceability of, andperformance by each Borrower of its obligations under this Agreement and eachother Transaction Document to which it is a party, and any other documentsnecessary or desirable to the implementation of any of those agreements ordocuments; and (v) the remittance to any Finance Party (or its assigns) ofall monies payable or owing to such Finance Party (or its assigns) under anyFinance Document in the currencies specified in such Finance Document; and allthose Authorizations are in full force and effect.

 

### **(i)**                                     Insurance

### ** **

The relevant Facility Agent shall have received:

 

#### **(i)**                                     copies of all insurance policies with respectto the Insurances, including the Insurances required to be obtained pursuant toSection 6.12 (*Insurance*) andSchedule 4 (*Insurance*) and a certification of therelevant insurers or insurance agents confirming that those policies are infull force 

 

29

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#### **and effect and all premiums then due and payableunder those policies have been paid; and**

#### ** **

#### **(ii)**                                  an insurance report from the InsuranceAdvisor confirming the adequacy of the Insurances for the Project and for the Borrowers’business.

#### ** **

### **(j)**                                     AccountingSystems and Auditors

### ** **

**The relevant Facility Agent shall havereceived:**

 

#### **(i)**                                     from the chief financial officer of eachBorrower (which shall be an Authorized Representative) a certificate certifyingthat, as at a date not earlier than sixty (60) days prior to the date of firstDisbursement under such Facility, such Borrower is in compliance with theprovisions of Section 6.5(a) (*Accounting*);

#### ** **

#### **(ii)**                                  evidence in writing that the Auditors havebeen appointed and that such appointment remains in full force and effect; and

#### ** **

#### **(iii)**                               a Certified Copy of a letter to the Auditorsfrom the Borrowers substantially in the form of Exhibit C (*Form of Letter to Auditors*), such letter not to havebeen rescinded.

#### ** **

### **(k)**                                  Legal Opinions

### ** **

**The relevant Facility Agent** shall have received the following legal opinions, duly executed andissued, regarding *inter alia*, due authorization,execution and delivery of the Finance Documents and the Block Z-1 License byeach Borrower and any other Person which is party to any such document (otherthan a Finance Party) and the enforceability of each Finance Document and theBlock Z-1 License, together with such other matters incidental to thetransactions contemplated thereby as**the relevant Facility Agent** may reasonably request:

 

#### **(i)**                                     the opinion of Rodrigo, Elías &Medrano Abogados, Peruvian counsel to the Borrowers;

#### ** **

#### **(ii)**                                  the opinion of Estudio Aurelio García SayánAbogados, Peruvian counsel to the Lenders;

#### ** **

#### **(iii)**                               the opinion of Dewey & LeBeouf LLP,special New York and Texas counsel to the Borrowers and BPZ Energy Inc.;

#### ** **

#### **(iv)**                              **the opinion of White & Case LLP, specialNew York counsel to the Lenders; and**

#### ** **

#### **(v)**                                 such other opinions relating to theTransaction Documents and the transactions contemplated thereby as **the relevant FacilityAgent** may reasonably request.

 

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### (l)                                     **Financial Statements**

###  

The relevant Facility Agent shall have received:

 

#### (i)                                     Certified Copies of the annualaudited Financial Statements of each Borrower and BPZResources for itsmost recent Financial Year; and

####  

#### (ii)                                  Certified Copies of the most recently delivered quarterly Financial Statements of eachBorrower and BPZ Resources,

####  

in each case, prepared in accordance with theAccounting Standards.

 

### (m)                               **Project Accounts**

###  

The Security Trustee shall have confirmed in writingto the relevant Facility Agent that the Revenue Account required to bemaintained at the Security Trustee pursuant to the Finance Documents has beenopened.

 

### (n)                                 **Financial Model**

###  

The relevant Facility Agentshall have received the Financial Model, the Base Case Assumptions and theBase Case.

 

### (o)                                 **Fees and Expenses**

###  

#### (i)                                     The Borrowers shall have paid to (or reimbursed, as the case may be)the Finance Parties all amounts (including any fees, costs and expenses) thendue and payable to the Finance Parties under any Finance Document (including,for the avoidance of doubt, any Fee Letter), and such payments shall not havebeen rescinded.

####  

#### (ii)                                  Without limiting paragraph (i) above, the Finance Parties shallhave been reimbursed (in full) for all invoiced fees and expenses of theircounsel in accordance with Section 6.15 (*Costs andExpenses*) or confirmation by that counsel that the Borrowers havedirectly paid those fees and expenses.

####  

### (p)                                 **Appointment of Agent**

###  

The Borrowersshall have delivered to the relevant Facility Agent evidence, substantially inthe form of Exhibit D (*Form of Appointmentof Service of Process Letter*), of appointment of an agent forservice of process pursuant to Section 9.7(e) (*Jurisdictionand Enforcement*).

 

### (q)                                 **Environmental Matters**

###  

The Borrowers have completed an S&EA and deliveredto IFC the Action Plan, each in form and substance acceptable to IFC, (ii) theBorrowers and IFC have agreed on the form of Annual Monitoring Report, and (iii) theBorrowers are 

 

31

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implementing the S&E Management System diligentlyand in accordance with the timetable described in the Action Plan and in amanner consistent with the Performance Standards.

 

### (r)                                    **Conditions in Facility Agreements**

###  

All conditions precedent to first Disbursement in therelevant Facility Agreement (except for the conditions precedent set forth inthis Agreement which are incorporated into such Facility Agreement) have beenfulfilled (or else waived by the relevant person in whole or in part) inaccordance with the terms of such Facility Agreement.

 

## **4.2**                                 Special Conditions for First Disbursement under IFC Facility

## ** **

The obligation of IFC to make the first Disbursementunder the IFC Facility shall be subject to the prior fulfillment (in each case,in form and substance satisfactory to IFC), or the prior waiver in whole or inpart by IFC, of the following additional conditions precedent:

 

### (a)                                  IFC shall have received confirmation from Bureau Veritas (or anotherindependent party satisfactory to IFC) that the FPSO has been commissioned andhas been operating normally at the CX11 platform in the Corvina field for aperiod of thirty (30) days.

###  

### (b)                                 IFC shall have received from Bureau Veritas an independent riskassessment satisfactory to IFC covering the FPSO production chain from wellheadto refinery (the “**Bureau Veritas RiskAssessment**”).

###  

### (c)                                  IFC shall have received (i) a copy of a Reserve Certificationdated no later than seven months prior to such first Disbursement and (ii) reasonablysatisfactory evidence of implementation of a plan to avoid flaring of gasassociated with oil production.

###  

### (d)                                 IFC shall have received evidence that: (i) whether pursuant toan amendment to the Import Duty Contract or otherwise, upon application of theproceeds of the first Disbursement of the IFC Loans to establish cashcollateral in full for the  obligationssecured under the Import Duty Contract, all revenues of the Borrowers shall bepaid to the Flow Trust, whether or not the Import Duty Contract is terminated, (ii) irrevocableinstructions have been issued and delivered by the Borrowers to the bankreceiving the proceeds of the first Disbursement of the IFC Loans (or by LaFiduciaria S.A. if such first Disbursement is made to an account under theImport Duty Contract) that such proceeds shall be applied to establish cashcollateral in full for the obligations secured under the Import Duty Contractand (iii) the Borrowers have made arrangements to instruct Petroperu topay all amounts payable to the Borrowers to the Flow Trust upon the applicationof the proceeds of the first Disbursement of the IFC Loans in accordance withclause (ii) above.

 

32

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### (e)                                  IFC shall have received the report, reasonably satisfactory to IFC,on the Supe accident, including lessons learned therefrom and follow-up actionsdefined as a result thereof.

###  

### (f)                                    IFC shall have received the report, reasonably satisfactory to IFC,summarizing strengthening of each Borrower’s capacities and organization.

###  

## **4.3**                                 Special Conditions for First Disbursement under Additional SecuredFacility

## ** **

The obligation of the Additional Secured FacilityLenders to make the first Disbursement under the Additional Secured Facilityshall be subject to the prior fulfillment (in each case, in form and substancesatisfactory to the Facility Agent for the Additional Secured Facility), or theprior waiver in whole or in part by such Facility Agent, of the followingadditional conditions precedent:

 

### (a)                                  The Facility Agent for the Additional Secured Facility shall havereceived evidence that (i) the Borrowing Base Amount is equal to orgreater than the amount to be agreed with such Facility Agent and (ii) allconditions in Section 4.2 have been fulfilled.

###  

### (b)                                 The Facility Agent for the Additional Secured Facility shall havereceived (i) a copy of a Reserve Certification dated no later than sevenmonths prior to such first Disbursement and (ii) satisfactory evidence ofimplementation of a plan to avoid flaring of gas associated with oilproduction.

###  

### (c)                                  The Facility Agent for the Additional Secured Facility shall havereceived evidence that an updated Field Development Plan for the Corvina Fieldhas been submitted to Perupetro.

###  

### (d)                                 The Facility Agent for the Additional Secured Facility shall havereceived evidence that the oil production environmental impact assessment forthe Corvina Field has been approved the Peruvian Ministry of Energy and Mining’sEnvironmental Directorate.

###  

### (e)                                  The Facility Agent for the Additional Secured Facility shall havereceived evidence that (i) commercial production has commenced in theCorvina Field under the Block Z-1 License, and (ii) BPZ Exploración hasretained its exploration rights under the Block Z-1 License with respect to allother Petroleum Assets in Block Z-1.

###  

### (f)                                    The Facility Agent for the Additional Secured Facility shall havereceived a copy of the Bureau Veritas Risk Assessment.

###  

### (g)                                 The Facility Agent for the Additional Secured Facility shall havereceived an audit report, in form and substance satisfactory to the FacilityAgent, prepared by Ernst and Young, certifying the fiscal and accountingassumptions utilized in the Financial Model and the internal consistency of theFinancial Model.

 

33

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### (h)                                 The Facility Agent for the Additional Secured Facility shall havereceived evidence that all revenues of the Borrowers are being paid to the FlowTrust and that any amendment to or termination of the Import Duty Contract hasbeen  recorded in the Movable Registry ofContracts (*Registro Mobiliario de Contratos*) inPeru.

###  

## **4.4**                                 All Disbursements under the Facilities

## ** **

The obligation of each Lender to make any Disbursementof any Loan shall also be subject to the prior fulfilment and delivery (in eachcase, in form and substance satisfactory to the relevant Facility Agent), orthe prior waiver in whole or in part by the relevant Facility Agent, of thefollowing conditions (on the date of the Disbursement Application with respectto such Disbursement and on the date of such Disbursement):

 

### (a)                                  **Disbursement Application**

###  

The relevant Facility Agent shall have received a dulyexecuted original copy of the Disbursement Application with respect to suchDisbursement from the Borrowers at least ten (10) Business Days prior tothe requested date of such Disbursement.

 

### (b)                                 **Continuing Validity of Documents**

###  

All agreements and instruments delivered to therelevant Facility Agent pursuant to paragraphs (a) (*Finance Documents*), (b) (*ProjectDocuments*) and (c) (*Security*) of Section 4.1(*First Disbursement under the Facilities*),together with any further documents which have since the date of this Agreementbeen designated a “Project Document” or “Finance Document” shall be in fullforce and effect.

 

### (c)                                  **Representations and Warranties**

###  

The representations and warranties made or confirmedby each of the Borrowers under each Finance Document to which it is a partyshall be true and correct in all material respects on and as of the date ofeach Disbursement and Disbursement Application with the same effect as thoughsuch representations and warranties had been made on and as of such dates,except that in the event any such representation or warranty has been expresslymade only as of an earlier date, such representation and warranty shall be trueand correct in all material respects as of such earlier date.

 

### (d)                                 **No Default**

###  

No Event of Default or Potential Event of Defaultshall have occurred and be continuing.

 

34

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### (e)                                  **No Material Adverse Effect**

###  

Notwithstanding any other provision in this Agreement,since the date of this Agreement, nothing has occurred which has or couldreasonably be expected to have a Material Adverse Effect.

 

### (f)                                    **Use of Proceeds**

###  

#### (i)                                     The proceeds of the Disbursement are, at the date of the DisbursementApplication with respect to such Disbursement, needed by the Borrowers for thepurpose of (x) the Project, or will be needed for such purpose withinthree (3) months of such date, (y) Permitted Nueva Esperanza CreditSupport or (z) with respect to the first Disbursement of the IFC Loans,establishing cash collateral in full for BPZ Exploración’s obligations securedunder the Import Duty Contract.

####  

#### (ii)                                  With respect to any Disbursement under the IFC Facility, theproceeds of that Disbursement are not in reimbursement of, or to be used for,expenditures in the territories of any country which is not a member of theWorld Bank or for goods produced in or services supplied from any such country.

####  

### (g)                                 **Suspension or Cancellation of Commitments**

###  

No Lender shall have suspended or cancelled itscommitment to make Loans under its Facility Agreement to the extent permittedto do so pursuant to the express terms thereof.

 

### (h)                                 **Additional conditions under the LoanAgreements**

###  

All conditions applying to such Disbursement under therelevant Facility Agreement shall have been satisfied (or waived, as the casemay be) by the relevant Facility Agent.

 

## **4.5**                                 Conditions for Benefit of Each Lender / Independent Drawings

## ** **

Notwithstanding anything to the contrary in thisAgreement or any other Finance Document, the conditions in Sections 4.1 (*First Disbursement under the Facilities*) and Section 4.2(*All Disbursements under the Facilities*)are for the benefit of each of the Lenders and with respect to any Disbursementunder a Facility by a Lender, the conditions of disbursement may only be waivedby such Lender or the relevant Facility Agent.

 

# **5.**                                      REPRESENTATIONS AND WARRANTIES

# ** **

## **5.1**                                 Representations and Warranties

## ** **

Each of the Borrowersmakes each of the followingrepresentations and warranties as of the date of this Agreement, the date ofeach Disbursement Application and the date of 

 

35

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each Disbursement (including the Disbursement of aRollover Loan), all of which shall survive the execution and delivery of thisAgreement and the repayment of any Loan:

 

### (a)                                  **Organization and Authority**

###  

It is a limited liability company duly incorporatedand validly existing under the laws of Peru and has the corporate power, andhas obtained all required Authorizations, to own its assets, conduct itsbusiness as presently conducted and to enter into, perform and comply with itsobligations under, the Transaction Documents to which it is a party and thetransactions contemplated by such Transaction Documents.

 

### (b)                                 **Subsidiaries; Capitalization**

###  

#### (i)                                     BPZ Marine is the only Subsidiary of BPZ Exploración.  BPZ Marine does not have any Subsidiaries.

####  

#### (ii)                                  As of thedate of this Agreement, the authorized capitalof BPZ Exploración consists of $35,916,936, fully paid, divided in 122,100Participations, each having a nominal value of $294.16, of which 122,100validly exist and are outstanding, 67,155 of which are owned beneficially andlegally of record by BPZ Energy Inc. and 54,945 of which are owned beneficiallyand legally of record by BPZ Energy International Holdings Limited Partnership.

####  

#### (iii)                               As of the date of this Agreement, the authorized capital of BPZMarine consists of S/3,000, fully paid, divided in 3,000 Participations, eachhaving a nominal value of S/1.00 (One Nuevo Sol), of which 3,000 validly existand are outstanding, 1,650 of which are owned beneficially and legally ofrecord by BPZ Exploración and 1,350 of which are owned beneficially by BPZEnergy International Holdings Limited Partnership and legally of record byJeannette Vanessa Durand Castro.

####  

#### (iv)                              As of June 30, 2008, BPZ Energy Inc. has advanced US$98,020,710.49 to BPZ Exploración and $0 to BPZ Marine pursuant to PermittedPartner Subordinated Loans.

####  

#### (v)                                 Except as described in clauses (i) through (iv) above,there do not exist any advances to either Borrower, or authorized oroutstanding Participations, securities, options, warrants, calls, commitments,rights to subscribe or other instruments, agreements or rights of anycharacter, or any pre-emptive rights, convertible into or exchangeable for, orrelating to the issuance, transfer or sale of, any capital of either Borrower.

####  

### (c)                                  **Validity**

###  

Each Transaction Document to which such Borrower is aparty has been duly authorized, executed and delivered by such Borrower andconstitutes a valid and 

 

36

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legally binding obligation of such Borrower,enforceable in accordance with its terms.

 

### (d)                                 **No Conflict**

###  

Neither the entry into, nor its compliance with or theperformance of the terms and conditions under, nor the making or delivery of,any Transaction Document to which such Borrower is a party will (includingafter giving effect to any Disbursement):

 

#### (i)                                     conflict with or result in a breach of any of the terms, conditionsor provisions of, or constitute a default (or an event which, with the givingof notice, or the passage of time would constitute a default) or require anyconsent under, any indenture, mortgage, agreement or other instrument or arrangementto which such Borroweris a party or by which such Borrower or any of itsassets is bound, except to the extent that any such conflict, breach or defaultcould not reasonably be expected to have a Material Adverse Effect;

####  

#### (ii)                                  result in the imposition of anyLien (other than Permitted Liens) under any agreement or instrument to whichsuch Borrower is a party or by which such Borrower or any of its assets isbound; or

####  

#### (iii)                               violate in any material respect any of the terms or provisions ofsuch Borrower’s Charter or any Authorization, judgment, decree or order or anystatute, rule or regulation applicable to such Borrower.

####  

### (e)                                  **Status of Authorizations**

###  

#### (i)                                     the Authorizations specified in Schedule 3 (*Authorizations*)are all the Authorizations (other than Authorizations that are of a routinenature and are obtained in the ordinary course of business) needed by theBorrowers on the date hereof to conduct their respective business, carry outthe Project and execute, and comply with its obligations under, this Agreementand each of the other Transaction Documents to which it is a party;

####  

#### (ii)                                  all Authorizations specified in Section 1 (*AuthorizationsAlready Obtained*) and, with respect to any Disbursement followingthe first Disbursement, Section 2 (*Authorizations to beObtained Prior to First Disbursement*) of Schedule 3 (*Authorizations*) have been obtained and are in full force andeffect;

####  

#### (iii)                               with respect to the firstDisbursement, the Borrowers have applied (or are making arrangements to apply)for all Authorizations specified in Section 2 (*Authorizations to be Obtained Prior to First Disbursement*) of Schedule 3 (*Authorizations*), and each of them has no reason to believethat it will not obtain those Authorizations in a timely manner; and

 

37

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#### (iv)                              except for rights that can reasonably be expected to be obtained oncommercially reasonable terms at the time required, the Project Documentscontain all rights that are necessary for:

####  

(A)                              the construction, completion,operation and ownership of the Project; and

 

(B)                                the conduct of the business ofthe Borrowers as contemplated by the Transaction Documents.

 

### (f)                                    **No Amendments to Charter**

###  

As of the date of this Agreement, (i) BPZExploración’s Charter has not been amended since June 28, 2007 and (ii) BPZMarine’s Charter has not been amended since its incorporation.

 

### (g)                                 **No Immunity**

###  

Neither such Borrower nor anyof its properties enjoys any right of immunity from set-off, suit or executionwith respect of its assets or its obligations under any Transaction Document towhich it is a party.

 

### (h)                                 **Financial Condition**

###  

Notwithstanding any other provision of this Agreement,since the date of its Financial Statements delivered pursuant to Section 4.1(l)(i) (*Financial Statements*), such Borrower has not suffered anychange that has or could reasonably be expected to have a Material AdverseEffect or incurred any substantial loss or liability.

 

### (i)                                     **Financial Statements / Financial Model**

###  

#### (i)                                     The most recent Financial Statements of the Borrowers deliveredpursuant to this Agreement:

####  

(A)                              have been prepared inaccordance with the Accounting Standards, consistently applied;

 

(B)                                present fairly, in allmaterial respects, the financial condition of each Borrower as of the date asof which they were prepared and the results of each Borrower’s operationsduring the period then ended; and

 

(C)                                disclose all materialliabilities (contingent or otherwise) of each Borrower, and the reserves, ifany, for such liabilities and all unrealised or material anticipatedliabilities and losses arising from commitments entered into by each Borrower(whether or not such commitments have been disclosed in such financialstatements).

 

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#### (ii)                                  The Base Case Assumptions were made in good faith and arrived atafter due and careful consideration and inquiry and genuinely represent theBorrowers’ views, and there is, to the best of each Borrower’s knowledge andbelief after making due and careful consideration and inquiry, no defect in theFinancial Model which might reasonably be expected materially and adversely toaffect the computation of the financial projections and projected cash flows(it being understood that such projections are not a guaranty of futureperformance and that actual results during the period or periods covered bysuch projections may materially differ from the projected results therein).

####  

#### (iii)                               BPZ Exploración has received proceeds of equity contributions andPermitted Partner Subordinated Loans in an amount not less than the amountshown in the Financial Model.

####  

### (j)                                     **Material Agreements**

###  

It is not in material breach of, or default in theperformance of its obligations under, any Project Document.

 

### (k)                                  **Title to Assets**

###  

It has good and marketable title to all of thematerial assets purported to be owned by it and possesses a valid leaseholdinterest in all material assets which it purports to lease.

 

### (l)                                     **Security**

###  

At the time of each Disbursement:

 

(i) the provisions of the Security Documents willbe effective to create, in favor of the Lenders, legal, valid and enforceableLiens on or in all of the assets covered by the Security; provided,that, with respect to the first Disbursement of the IFC Loans, (x) theapplicable filings have been made with the Movable Registry of Contracts (*Registro Mobiliario de Contratos*) but registration of theLiens created under the Participations Pledge and the Flow Trust may not becompleted and  such Liens will not beenforceable until such registration is complete and (y) withrespect to the Flow Trust, the Borrowers’ revenues shall continue to be paid tothe trust established under the Import Duty Contract until the proceeds of thefirst Disbursement of the IFC Loans have been applied in accordance with Section 4.4(f)(i)(z) andPetroperu has been notified to commence payments to the Flow Trust inaccordance with Section 6.12; and

 

(ii) all recordings and filings will have beenmade in all public offices, all necessary consents will have been obtained andall other action will have been taken so that the Liens created by eachSecurity Document will constitute perfected Liens on the Security with thepriority specified in the Security Documents; provided, that, withrespect to the first Disbursement of the IFC 

 

39

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Loans, (x) the applicable filings have been madewith the Movable Registry of Contracts (*Registro Mobiliario deContratos*) but registration of the Liens created under theParticipations Pledge and the Flow Trust may not be completed and (y) withrespect to the Flow Trust, the Borrowers’ revenues shall continue to be paid tothe trust established under the Import Duty Contract until the proceeds of thefirst Disbursement of the IFC Loans have been applied in accordance with Section 4.4(f)(i)(z) andPetroperu has been notified to commence payments to the Flow Trust inaccordance with Section 6.12.

 

### (m)                               **No Liens**

###  

None of its assets are subject to any Lien, except forPermitted Liens, and it is not subject to any contract, arrangement or Law,whether conditional or unconditional, pursuant to which any Lien on its assetsmay be created, except for Permitted Liens.

 

### (n)                                 **Taxes**

###  

#### (i)                                     All material Tax returns and reports required by Law to be filed byit have been duly filed and all Taxes, obligations, assessments, fees and othergovernmental charges upon it, its properties or its income or assets, which aredue and payable or to be withheld, have been paid or withheld, other than thosecurrently payable without penalty or interest.

####  

#### (ii)                                  There is no stamp or other Tax or charge of Peru or any politicalsubdivision or Taxing authority thereof, or of any Taxing authority, federationor association of which Peru is a member, to be imposed on or by virtue of theexecution, delivery or performance of any Transaction Document to which it is aparty or necessary to ensure the legality, validity, enforceability oradmissibility in evidence thereof in Peru other than (i) withholding taxin respect of interest paid to the Additional Secured Facility Lenders, (ii) amountsthat are required to be paid in connection with the registration of theSecurity Documents with the competent authorities of Peru (which have beenpaid), and (iii) other amounts to be paid, if any, in connection withcourt or arbitral proceedings, procedures for arrest of or seizure andforeclosure on property, and procedures for the enforcement of court orarbitral decisions or awards.

####  

### (o)                                 **Litigation**

###  

#### (i)                                     It is not engaged in nor, to the best of its knowledge, after dueinquiry, threatened by, any material litigation, arbitration or administrativeproceedings.

####  

#### (ii)                                  No judgment or order for an amount of one million Dollars($1,000,000) or more (or its equivalent in any other currency or currencies)has been issued against it.

 

40

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### (p)                                 **Compliance with Laws**

###  

To the best of its knowledgeand belief, after due inquiry, it is not in violation (i) in any materialrespect of any Laws (other than Laws relating to the environment, health andsafety) and (ii) of any Laws relating to the environment, health andsafety, in each case presently in effect.

 

### (q)                                 **Environmental Matters**

###  

#### (i)                                     To the best of its knowledge and belief, after due inquiry, thereare no material social or environmental risks or issues in relation to theProject other than those identified by the S&EA.

####  

#### (ii)                                  It has not received nor is aware of either (A) any existing orthreatened complaint, order, directive, claim, citation or notice from anyAuthority or (B) any material written communication from any Personconcerning the Project’s failure to comply with any matter covered by thePerformance Standards which failure has, or could reasonably be expected tohave, a Material Adverse Effect or a material adverse impact on theimplementation or operation of the Project in accordance with the PerformanceStandards.

####  

### (r)                                    **Sanctionable Practices**

###  

Neither it nor BPZ Resources,nor any Affiliates, nor any Person acting on its or their behalf, has committedor engaged in, with respect to the Project or any transaction contemplated bythis Agreement, any Sanctionable Practice.

 

### (s)                                  **Labor Matters**

###  

There are no ongoing or, to itsbest knowledge after due inquiry, threatened, strikes, slowdowns or work stoppages byits employees or the employees of any contractor with respect to the Project, exceptsuch strikes, slowdowns or work stoppages as could not reasonably beexpected to have a Material Adverse Effect.

 

### (t)                                    **Pari Passu Status**

###  

Itsobligations under the Finance Documents rank at least pari passu with theclaims of all its unsecured and unsubordinated creditors, except forobligations mandatorily preferred by law applying to companies in Perugenerally.

 

### (u)                                 **Proprietary Rights**

###  

The Borrowers own, havesufficient title to, or have the right to use (or can obtain the right to useon reasonable commercial terms), all patents, trademarks, service marks, tradenames, copyrights, licenses, trade secrets or other proprietary rights(collectively, “**Proprietary Rights**”) necessary totheir business as now conducted and as contemplated to be conducted withoutinfringing upon the rights 

 

41

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of any Person.  Except for employee confidentialityagreements with employees and consultants, there are no outstanding materialoptions, licenses or agreements relating to Proprietary Rights of eitherBorrower nor is either Borrower bound by or a party to any material options,licenses or agreements with respect to the Proprietary Rights of any otherPerson.  To each Borrower’s knowledge,neither Borrower has violated or is in current violation of, and neitherBorrower has received any communications alleging that it has violated, or byconducting its business as proposed, would violate, the Proprietary Rights ofany other Person.  Neither Borrower isaware of any material violation by any third party of any of its ProprietaryRights.

 

### (v)                                 **Related Party Transactions**

###  

Except in respect of (a) PermittedPartner Subordinated Loans, (b) the transactions contemplated with respectto the agreement with BPZ Marine (Texas) for lease of a barge and (c) arm’slength arrangements between the Borrowers and any Affiliate, the expense ofwhich is or will be included in Corporate G&A Adjustment, no existingmaterial written or oral agreement or instrument, including, without limitation,trust instrument, indenture or evidence of indebtedness, lease, contract orother obligation or commitment of either Borrower is with or for the directbenefit of (i) any party (other than the other Borrower) owning, orformerly owning, beneficially or of record, directly or indirectly, in excessof five per cent (5%) of the outstanding capital stock of either Borrower, (ii) anydirector, officer or similar representative of either Borrower, (iii) anynatural 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 partieshas, directly or indirectly, at least a five per cent (5%) beneficial interest(a “**Related Party**”).  Without limiting the generality of theforegoing, no Related Party, directly or indirectly, owns or controls anymaterial assets or material properties which are used in the Borrowers’business and to the actual knowledge of each Borrower, no Related Party,directly or indirectly, engages in or has any significant interest in orconnection with any business which is, or has been within the last two (2) years,a competitor, customer or supplier of either Borrower or has done business witheither Borrower or which currently sells or provides products or services whichare similar or related to the products or services sold or provided inconnection with the business of either Borrower.  For the avoidance of doubt, the foregoingdoes not prevent a Permitted License Transfer.

 

### (w)                               **No Material Omissions**

###  

When taken as a whole, thefactual information provided to the Facility Agents was true, accurate andcomplete in all material respects as at the date it was provided or as at thedate (if any) at which it is stated and is not misleading in any materialrespect.

 

42

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## **5.2**                                 Acknowledgement and Warranty

## ** **

Each Borrower acknowledges thatit has made the representations and warranties contained in Section 5.1 (*Representations and Warranties*) above with the intention ofinducing each of the Finance Parties to enter into the Finance Documents towhich they are a party and that each of the Finance Parties has entered suchdocuments on the basis of, and in full reliance on, each of suchrepresentations and warranties.

 

# **6.**                                      AFFIRMATIVE COVENANTS

# ** **

## **6.1**                                 Use of Proceeds

## ** **

### (a)                                  The Borrowers shall, at all times, use the proceeds of the Loansunder each Facility in accordance with the terms of, and solely for thepurposes as set out in, the Facility Agreement relating to such Facility and,in any event, in compliance with Section 4.4(f) (*Use ofProceeds*).

###  

### (b)                                 Subject to the terms of the Facility Agreements, the Borrowers shallprocure that all Loans are disbursed to the Revenue Account or such other bankaccount in Peru as may be notified by the Borrowers to the Facility Agents.

###  

## **6.2**                                 Corporate Existence; Conduct of Business

## ** **

Each Borrower shall maintainits corporate existence, comply with its Charter, and implement the Project andconduct its business in all material respects with due diligence andefficiency, in accordance with sound engineering, financial and businesspractices.

 

## **6.3**                                 Compliance with Laws

## ** **

Each Borrower shall conduct itsbusiness in compliance, in all material respects, with all applicablerequirements of Law.

 

## **6.4**                                 Taxes

## ** **

Each Borrower shall file by thedate due all returns, reports and filings in respect of Taxes required to befiled by it and pay or withhold, when due, all Taxes due and payable by it orrequired to be withheld by it, except such Taxes, if any, as are being contestedin good faith and by proper proceedings and as to which adequate reserves havebeen provided in accordance with the Accounting Standards.

 

## **6.5**                                 Accounting; Auditors

## ** **

Each Borrower shall:

 

### (a)                                  promptly install and maintain an accounting and control system,management information system and books of account and other records, whichtogether adequately give a fair and true view of the financial condition ofsuch Borrower and the results of its operations in conformity with theAccounting Standards.

 

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### (b)                                 appoint and maintain at all times a firm of internationallyrecognized independent public accountants reasonably acceptable to the FacilityAgents as auditors of such Borrower.

###  

### (c)                                  irrevocably authorize, in the form of Exhibit C, the Auditors(whose fees and expenses shall be for the account of the Borrowers) tocommunicate directly with the Lenders at any time regarding the Borrowersfinancial statements (both audited and unaudited), accounts and operations, andprovide to each of the Facility Agents a copy of that authorization.

###  

### (d)                                 no later than thirty (30) days after any change in Auditors, issue asimilar authorization to the new Auditors and provide a copy thereof to each ofthe Facility Agents.

###  

## **6.6**                                 Access

## ** **

Upon a request by any FacilityAgent, and with five (5) Business Days prior notice to the relevantBorrower, permit representatives of the Facility Agents and the CAO (includingany consultants), during normal office hours and subject to such Borrower’sreasonable health and safety rules, environmental policies and prudentoperational requirements, to:

 

### (a)                                  visit any of the sites and premises where the business of suchBorrower is conducted;

###  

### (b)                                 inspect any of such Borrower’s sites, facilities, plants andequipment;

###  

### (c)                                  have access to such Borrower’s books of account and all records; and

###  

### (d)                                 have access to those employees, agents, contractors andsubcontractors of such Borrower who have or may have knowledge of matters withrespect to which such Facility Agent seeks information;

###  

at such Borrower’s reasonableexpense and no more than twice annually (in the case of each Facility Agent)and at IFC’s expense (in the case of the CAO); provided that (i) no suchprior notice shall be necessary if an Event of Default or Potential Event ofDefault is continuing and (ii) in the case of the CAO, such access shallbe for the purpose of carrying out the CAO’s Role.

 

## **6.7**                                 Environment, Social, Health and Safety

## ** **

The Borrowers shall (throughtheir employees, agents, contractors and subcontractors), ensure that thedesign, construction, operation, maintenance, management and monitoring of theProject’s sites, plants, equipment, operations and facilities are undertaken incompliance with (i) the Action Plan, and (ii) the applicablerequirements of the Performance Standards.

 

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## **6.8**                                 Annual Monitoring Report; S&E Management System

## ** **

The Borrowers shall:

 

### (a)                                  periodically review the form of the Annual Monitoring Report and adviseIFC as to whether revision of the form is necessary or appropriate in light ofmaterial changes to the Borrowers’ business or operations, or in light ofenvironmental or social risks identified by the Borrowers’ S&E ManagementSystem, and revise the form as agreed with IFC; and

###  

### (b)                                 use all reasonable efforts to ensure the continuing implementationand operation of the S&E Management System to assess and manage the socialand environmental performance of the Project in a manner consistent with thePerformance Standards.

###  

## **6.9**                                 Continuing Governmental and Other Approvals

## ** **

The Borrowers shall:

 

### (a)                                  obtain, when required, and maintain in force (and where appropriate,renew in a timely manner) (i) the Block Z-1 License and each other LicenseContract, and (ii) all Authorizations, including without limitation theAuthorizations specified in Schedule 3 (*Authorizations*),which are necessary for the implementation of the Project, the carrying out ofthe Borrowers’ business and operations generally and the compliance by theBorrowers with all their obligations under the Transaction Documents; and

###  

### (b)                                 comply with all the conditions andrestrictions contained in, or imposed on the Borrowers by, the Block Z-1License, each other License Contract and those Authorizations.

###  

## **6.10**                           Financial Ratios

## ** **

The Borrowers shall at alltimes maintain:

 

#### (i)                                     an LOF of not less than 2.0;

####  

#### (ii)                                  an LOL of not less than 1.8;

####  

#### (iii)                               a Debt to Equity Ratio of not greater than 65:35; and

####  

#### (iv)                              Interest Cover of not less than 2.5.

####  

## **6.11**                           Insurance

## ** **

### (a)                                  The Borrowers shall:

###  

#### (i)                                     insure and keep insured, with financially sound and reputableinsurers, and in accordance with local regulations, all its assets and businessagainst all 

 

45

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#### insurable losses,which shall include all the insurances specified in Schedule 4 (*Insurance*) and any insurance required by Law;

####  

#### (ii)                                  punctually pay any premium, commission and any other amountsnecessary for effecting and maintaining in force each insurance policy;

####  

#### (iii)                               promptly notify the relevant insurer of any claim by the relevantBorrower under any policy written by that insurer and diligently pursue thatclaim;

####  

#### (iv)                              comply with all warranties under each policy of insurance;

####  

#### (v)                                 not do or omit to do, or permit to be done or not done, anythingwhich might prejudice the Borrowers’, or, where any Finance Party is anadditional named insured, such Finance Party’s right to claim or recover underany insurance policy; and

####  

#### (vi)                              not vary, rescind, terminate, cancel or cause a material change toany insurance policy unless such insurance policy is replaced by a newinsurance policy in accordance with the terms and conditions of this Agreement,

####  

provided always that, if at anytime and for any reason any insurance required to be maintained under thisAgreement shall not be in full force and effect, then the Facility Agents shallthereupon, or at any time while the same is continuing, be entitled (but haveno such obligation) on their own behalf to procure that insurance at theexpense of the Borrowers and to take all such steps to minimize hazard as eachof the Facility Agents may consider expedient or necessary.

 

### (b)                                 Each insurance policy required to be obtained pursuant to this Section 6.12shall be on terms and conditions acceptable to the Facility Agents and shallcontain provisions to the effect that:

###  

#### (i)                                     no policy can expire nor can it be cancelled or suspended by theBorrowers or the insurer for any reason (including failure to renew the policyor to pay the premium or any other amount) unless the Facility Agents and, inthe case of expiration or if cancellation or suspension is initiated by theinsurer, the Borrowers receive at least forty-five (45) days’ notice (or suchlesser period as the Facility Agents may agree with respect to cancellation,suspension or termination in the event of war and kindred peril) prior to theeffective date of termination, cancellation or suspension;

####  

#### (ii)                                  the Finance Parties are named as additional named insured on allliability policies listed in Schedule 4 (*Insurance*); and

####  

#### (iii)                               where relevant, all its provisions (except those relating to limitsof liability) shall operate as if they were a separate policy covering eachinsured party.

 

46

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### (c)                                  Each Borrower shall use any insurance proceeds it receives for lossof or damage to any asset solely to replace or repair that asset.

###  

### (d)                                 The Borrowers shall provide to each of the Facility Agents thefollowing:

###  

#### (i)                                     as soon as possible after its occurrence, notice of any event whichentitles any Borrower to claim for an aggregate amount exceeding the equivalentof three million Dollars ($3,000,000) under any one or more insurance policies;

####  

#### (ii)                                  within thirty (30) days after any insurance policy is issued to anyBorrower, a copy of that policy incorporating any provisions required under Section 6.12(b) (iv) (unless that policy has already been provided to theFacility Agents pursuant to Section 4.1(i) (*Conditions Precedent*);

####  

#### (iii)                               not less than ten (10) days prior to the expiry date of anyinsurance policy (or, for insurance with multiple renewal dates, not less thanten (10) days prior to the expiry date of the policy on the principalasset), a certificate of renewal from the insurer, insurance broker or agentconfirming the renewal of that policy and the renewal period, the premium, theamounts insured for each asset or item and any changes in terms or conditionsfrom the policy’s issue date or last renewal, and confirmation from the insurerthat provisions naming the Finance Parties as additional named insured remainin effect;

####  

#### (iv)                              such evidence of premium payment as any Facility Agent may from timeto time request; and

####  

#### (v)                                 any other information or documents on each insurance policy as anyFacility Agent reasonably requests from time to time.

####  

## **6.12**                           Security

## ** **

(a)                                  The Borrowers shall from time to time, execute, acknowledge anddeliver or cause to be executed, acknowledged and delivered such furtherinstruments as may necessary or may reasonably be requested by any FacilityAgent for perfecting or maintaining in full force and effect the Security orfor re-registering the Security or otherwise and, if necessary, create andperfect additional Security to enable the Borrowers to comply with their obligationsunder the Transaction Documents;

 

(b)                                 The Borrowers shall cause the registration of the ParticipationsPledge and the Flow Trust with the Movable Registry of Contracts (*Registro Mobiliario de Contratos)* in Peru to be completedprior to the earlier of (i) the first Disbursement under the AdditionalSecured Facility and (ii) forty-five (45) days following the firstDisbursement of the IFC Loans; and

 

(c)                                  Promptly upon application of the proceeds of the first Disbursementof the IFC Loans in accordance with Section 4.4(f)(i)(z), the Borrowersshall (i) cause La Fiduciaria 

 

47

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S.A. to deliver written noticeto Petroperu instructing Petroperu to cease making payments to the trustestablished under the Import Duty Contract and (ii) together with LaFiduciaria S.A., deliver written notice to Petroperu instructing Petroperu tomake all payments to the Flow Trust.

 

## **6.13**                           Further Documents

## ** **

The Borrowers shall execute allsuch other documents and instruments and do all such other acts and things asare necessary to give effect to the provisions of any Transaction Document andto cause any Transaction Document to be duly registered, notarised and stampedin any applicable jurisdiction.

 

## **6.14**                           Costs and Expenses

## ** **

### (a)                                  The Borrowers shall pay or, as the case may be, reimburse eachFinance Party or its assignees any amount paid by them on account of, all taxes(including stamp taxes), duties, fees or other charges payable on or inconnection with the execution, issue, delivery, registration or notarization ofthe Transaction Documents and any other documents related to this Agreement orany other Transaction Document.

###  

### (b)                                 The Borrowers shall pay to each Facility Agent or as such FacilityAgent may direct:

###  

#### (i)                                     the documented fees and expenses of the Independent Engineer, theInsurance Consultant and the Lenders’ other technical and market consultantsincurred in connection with the Loans and investment provided for under theFinance Documents;

####  

#### (ii)                                  the documented fees and expenses of such Facility Agent’s counsel inPeru and New York incurred in connection with:

####  

(A)                              the preparation of the Loans and investment provided for under thisAgreement and any other Transaction Document;

 

(B)                                the preparation and/or review, execution and, where appropriate,translation and registration of the Transaction Documents and any otherdocuments related to them;

 

(C)                                the giving of any legal opinions required by the Lenders under thisAgreement and any other Transaction Document;

 

(D)                               the administration by the Lenders of the investment provided for inthis Agreement or otherwise in connection with any amendment, supplement ormodification to, or waiver under, any of the Transaction Documents;

 

48

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(E)                                 the registration (where appropriate) and the delivery of theevidences of indebtedness relating to the Loans and its disbursement;

 

(F)                                 the occurrence of any Event of Default or Potential Event ofDefault; and

 

(G)                                the release of the Security following repayment in full of theLoans;

 

#### (iii)                               the costs and expenses incurred by each of the Facility Agents inrelation to efforts to enforce or protect its rights under any TransactionDocument, or the exercise of its rights or powers consequent upon or arisingout of the occurrence of any Event of Default or Potential Event of Default,including documented legal and other professional consultants’ fees on a fullindemnity basis.

####  

## **6.15**                           Financial Model

## ** **

The Borrowers shall, promptlyupon becoming aware that there are any defects in the Financial Model whichmight materially and adversely affect the operation of the Financial Model,rectify those defects in a manner satisfactory to the Facility Agents.

 

## **6.16**                           Furnishing of Information by the Borrowers

## ** **

Each Borrower shall:

 

### (a)                                  *Monthly Reports*.  As soon as available but in any event withinfifteen (15) days after the end of each month of each Financial Year, deliverto each of the Facility Agents a report of BPZ Exploración summarizing keytesting and production data for the Corvina Field and the other Borrowing BaseAssets, in the form to be agreed by the Facility Agents (acting reasonably)prior to the first Disbursement of the IFC Loans.

###  

### (b)                                 *Quarterly Financial Statements and Reports*.  As soon as available but inany event within sixty (60) days after the end of each quarter of eachFinancial Year, deliver to each of the Facility Agents:

###  

#### (i)                                     two (2) copies of the Borrowers’ complete consolidatedfinancial statements for such quarter prepared in accordance with theAccounting Standards, certified by the Borrowers’ chief financial officer;

####  

#### (ii)                                  a report (inthe form pre-agreed by the Facility Agents) by theBorrowers on their respective operations during that quarter or, so long as BPZResources is a reporting company under the U.S. Securities Exchange Act of1934, a copy of BPZ Resources’ quarterly report (Form 10-Q) as filed withthe U.S. Securities and Exchange Commission;

 

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#### (iii)                               a report (in the form pre-agreed by the Facility Agents), signed bythe Borrowers’ chief financial officer, concerning compliance with thefinancial covenants in this Agreement (including a clear description of themethodology used in the respective calculations); and

####  

#### (iv)                              a report on any factors that have or could reasonably be expected tohave a Material Adverse Effect.

####  

### (c)                                  *Annual Financial Statements and Reports*.  As soon as available but inany event within one hundred twenty (120) days after the end of each FinancialYear, deliver to each of the Facility Agents:

###  

#### (i)                                     two (2) copies of the Borrowers’ complete and auditedconsolidated financial statements for that Financial Year (which are inagreement with its books of account and prepared, in accordance with theAccounting Standards, together with the Auditors’ audit report on them, all inform reasonably satisfactory to the Facility Agents;

####  

#### (ii)                                  any management letter and any other communication from the Auditorscommenting, with respect to that Financial Year, on, among other things, theadequacy of the Borrowers’ financial control procedures, accounting systems andmanagement information system;

####  

#### (iii)                               a report (in the formpre-agreed by the Facility Agents), signed by the Borrowers’ chief financialofficer and reviewed by its Auditors, concerning compliance with the financialcovenants in this Agreement (including a clear description of the methodologyused in the respective calculations);

####  

#### (iv)                              a report (inthe form pre-agreed by the Facility Agents) by theBorrowers on their respective operations during that Financial Year or, so longas BPZ Resources is a reporting company under the U.S. Securities Exchange Actof 1934, a copy of BPZ Resources’ annual report (Form 10-K) as filed withthe U.S. Securities and Exchange Commission; and

####  

#### (v)                                 a statement by the Borrowers of all transactions between eachBorrower and each of its Affiliates, if any, during that Financial Year, and acertification by the Borrowers’ chief financial officer that those transactionswere on the basis of arm’s-length arrangements;

####  

### (d)                                 *License Contract Notices, Reports, Opinions, etc.*

###  

#### (i)                                     No later than five (5) Business Days after delivery thereof toPerupetro, deliver to each Facility Agent copies of each Field DevelopmentPlan, report, notice or other material communication delivered pursuant to eachLicense Contract.

 

50

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#### (ii)                                  Promptly following the designation of any Petroleum Assets asBorrowing Base Assets, deliver to each Facility Agent a copy of the LicenseContract related thereto (if not previously so delivered) together with a legalopinion of Peruvian counsel to the Borrowers substantially in the formdelivered pursuant to Section 4.1(k)(i) with respect to mattersrelating to such License Contract.

####  

### (e)                                  *Reserve Certification; Base CaseUpdates*.

###  

#### (i)                                     At the Borrowers’ expense, prior to the first Disbursement and withinninety (90) days following the end of each Financial Year, and from time totime as requested by any Facility Agent, but no more than two (2) timesper Financial Year, deliver to the Facility Agents an updated ReserveCertification, in form and substance satisfactory to the Facility Agents.

####  

#### (ii)                                  At the Borrowers’ expense, (A) no later than fifteen (15) daysprior to each Disbursement Application (other than a Rollover Request), (B) noearlier than ninety (90) days, and no later than sixty (60) days, prior to eachCalculation Date, and (C) on any other date, at the request of eitherFacility Agent or, once during any calendar year, the Borrowers, deliver to theFacility Agents an updated Base Case utilizing the updated Base CaseAssumptions, including calculations of the LOF, LOL, Interest Cover and Debt toEquity Ratio as of such Calculation Date, all in form and substancesatisfactory to the Facility Agents.

####  

### (f)                                    *Annual Monitoring Report.* Within ninety (90) days after the end of each Financial Year, deliver tothe Facility Agents the corresponding Annual Monitoring Report confirmingcompliance with the Action Plan, the social and environmental covenants setforth in Sections 6 and 7 and Applicable S&E Law, or, as the case may be,identifying any non-compliance or failure, and the actions being taken toremedy it;

###  

### (g)                                 *Notice of Accidents, Etc.* Within three (3) days after such Borrowerbecomes aware of its occurrence, notify the Facility Agents of any social,labor, health and safety, security or environmental incident, accident orcircumstance having, or which could reasonably be expected to have, a MaterialAdverse Effect or material adverse impact on the implementation or operation ofthe Project in accordance with the Performance Standards, specifying in eachcase the nature of the incident, accident, or circumstance and any effectresulting or likely to result therefrom, and the measures the Borrower istaking or plans to take to address them and to prevent any future similarevent; and keep the Facility Agents informed of the on-going implementation ofthose measures and plans;

###  

### (h)                                 *Partner Matters*.  As soon as reasonably available, deliver tothe Facility Agents two (2) copies of: (i) all notices, reports andother communications of such Borrower to its partners (other than notificationsto its partners of any meeting of its partners), whether any such communicationhas been made on an individual 

 

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### basis or byway of publication in a newspaper or other communication medium; and (ii) theminutes of all partners’ meetings.

### * *

### (i)                                     *Changes to Project; Material Adverse Effect*.  Within five (5) BusinessDays of (x) deciding on any proposed change in the nature or scope of theProject or the business or operations of the Borrower and (y) becomingaware of the occurrence of any event or condition that has or may reasonably beexpected to have a Material Adverse Effect, notify the Facility Agents thereof;

###  

### (j)                                     *Litigation, Etc*.  Within five (5) Business Days ofbecoming aware of any litigation or administrative proceedings before anyAuthority or arbitral body which has or may reasonably be expected to have aMaterial Adverse Effect, notify the Facility Agents by facsimile of that eventspecifying the nature of that litigation or those proceedings and the steps theBorrower is taking or proposes to take with respect thereto;

###  

### (k)                                  *Default*.  Within one (1) Business Day of becomingaware of the occurrence of an Event of Default or Potential Event of Default,notify the Facility Agents by facsimile specifying the nature of that Event ofDefault or Potential Event of Default and any steps the Borrower is taking toremedy it;

###  

### (l)                                     *Public Disclosures*.  Publicly disclose, or cause the publicdisclosure of (whether through U.S. Securities and Exchange Commission filingsby BPZ Resources or otherwise), on an annual basis within 120 days followingthe end of each Financial Year, all material payments (such as taxes,royalties, profit shares) made in the previous year to the local and/ornational governments of Peru and, if applicable, Ecuador under the LicenseContracts or similar contracts; and

###  

### (m)                               *Other**Information*.  Promptly provide to the Facility Agents suchother information as any Facility Agent from time to time reasonably requestsabout the Borrower, its assets and the Project.

###  

## **6.17**                           Receivables

## ** **

Each Borrower shall irrevocablyinstruct each Person who is or becomes a party to (i) an OfftakeAgreement, (ii) a contract with respect to Insurances or (iii) anyother contract with such Borrower (other than any Finance Party) involvingaggregate payments to such Borrower in excess of $100,000 (or each Person whootherwise owes or may owe money to such Borrower in an amount exceeding$100,000) at any time that all payments that are due or that become due to suchBorrower shall be made, and such Borrower hereby agrees to cause each suchPerson to make all such payments, directly to the Revenue Account; providedthat, with respect to the Flow Trust, the Borrowers’ revenues may continue tobe paid to the trust established under the Import Duty Contract until theproceeds of the first Disbursement of the IFC Loans have been applied inaccordance with Section 4.4(f)(i)(z) and Petroperu has been notifiedto commence payments to the Flow Trust in accordance with Section 6.12.  If any Borrower receives any payment otherthan to the Revenue Account, whether directly or to a bank account other thanthe 

 

52

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Revenue Account or otherwise, suchBorrower shall promptly transfer, or cause the transfer of, such payment to theRevenue Account.

 

## **6.18**                           Import Duty Contract

## ** **

### The Borrowersshall promptly, but in any event no later than the earlier of (x) forty-five(45) days after the first Disbursement of the IFC Loans and (y) the firstDisbursement under the Additional Secured Facility, deliver to the FacilityAgents evidence that all revenues of the Borrowers are being paid to the FlowTrust and that any amendment to or termination of the Import Duty Contract hasbeen recorded in the Movable Registry of Contracts (*RegistroMobiliario de Contratos*) in Peru.

###  

## **6.19**                           Satisfaction of Special Conditions

## ** **

### Theconditions precedent set forth in Section 4.3 shall have been fulfilled inform and substance satisfactory to IFC no later than November 30, 2008.

###  

# **7.**                                      NEGATIVE COVENANTS

#  

## **7.1**                                 Distributions

## ** **

Neither Borrower shall declareor pay any dividend, or make any distribution on its equity capital, orpurchase, redeem or otherwise acquire any Participations or any option over thesame, or make any payment, distribution or cash transfer to any holder ofequity interests in the Borrower (or any Affiliate), including any payment inrespect of Permitted Partner Subordinated Loans and any return of capital,unless:

 

### (a)                                  after giving effect to any such action:

###  

#### (i)                                     no Event of Default or Potential Event of Default has occurred andis continuing; and

####  

#### (ii)                                  each of the LOL, LOF, and Interest Cover is in compliance with theMinimum Level therefor and the Debt to Equity Ratio is no greater than 65:35;

####  

#### **provided, however**, that, any of the foregoing shallonly be made on a semi-annual basis, on any date occurring after an InterestPayment Date but no later than ten (10) days thereafter and **provided, further,**that, prior to January 31, 2009, BPZ Exploración shall have the rightto make up to two distributions in accordance with the requirements of Section 7.1(a) (i) and (ii) totalling no more than forty million Dollars(US$40,000,000) in the aggregate.

####  

### (b)                                 At least ten (10) Business Days, but no earlier than twenty(20) Business Days, prior to doing so, the Borrower certifies to each of thematters referred to in Section 7.1 (a) to each Facility Agent inwriting, in the form attached as Exhibit E (*Form ofDistribution Request*).

 

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## **7.2**                                 Expenditures

## ** **

Neither Borrower shall incur expenditures or commitments for expendituresfor fixed or other non-current assets, other than those required for carryingout the Project as contemplated in the Base Case or necessary for repairs,replacements and maintenance of satisfactory operating conditions that areessential to such Borrower’s business or operations and in each case which donot, during any Calculation Period, exceed the aggregate amount thereforreflected in the Base Case.

 

## **7.3**                                 Financial Debt

## ** **

Neither Borrower shall incur,assume or permit to exist any Financial Debt except for Permitted FinancialDebt.

 

## **7.4**                                 Guarantees and Other Obligations

## ** **

Neither Borrower shall enterinto any agreement or arrangement to guarantee or, in any way or under anycondition, assume or become obligated for all or any part of any financial orother obligation of another Person, except for Permitted Nueva Esperanza CreditSupport and except for the joint and several obligations of the Borrowers underthe Finance Documents.

 

## **7.5**                                 Derivative Transactions

## ** **

Neither Borrower shall:

 

### (a)                                  enter into any Derivative Transaction, other than DerivativeTransactions entered into in the ordinary course of business that do notrequire any collateral (cash or otherwise), except with the prior writtenconsent of the Facility Agents; or

###  

### (b)                                 assume the obligations of any party to any Derivative Transaction.

###  

## **7.6**                                 Liens

## ** **

Neither Borrower shall createor permit to exist any Lien on any property, revenues or other assets, presentor future, of such Borrower, except for Permitted Liens.

 

## **7.7**                                 Arm’s Length Transactions

## ** **

Neither Borrower shall enterinto any transaction except (i) in the ordinary course of business on thebasis of arm’s-length arrangements or at cost arrangements on terms not lessfavorable to the Borrowers than could be obtained from an unrelated party(including, without limitation, transactions whereby such Borrower might paymore than the ordinary commercial price for any purchase or might receive lessthan the full commercial price (subject to normal trade discounts) for anysale) and (ii) Permitted License Transfers.

 

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## **7.8**                                 Exclusive Purchasing or Sales Agency Arrangements

## ** **

Neither Borrower shall enterinto any sole and exclusive purchasing or sales agency.

 

## **7.9**                                 Profit-sharing

## ** **

Neither Borrower shall enterinto any partnership, profit-sharing or royalty agreement or other similararrangement whereby such Borrower’s income or profits are, or might be, sharedwith any other Person, except for (i) mandatory sharing of profits withemployees required under the Laws of Peru or (ii) the Shell Farm-OutAgreement.

 

## **7.10**                           Entry into Agreements

## ** **

Neither Borrower shall enterinto any agreement, contract or commitment (or, without limiting the foregoing,incur additional obligations in addition to those incurred under the ProjectDocuments) where to do so would result in or could be reasonably expected tohave a Material Adverse Effect.

 

## **7.11**                           No Subsidiaries; Transfers of Subsidiary Capital

## ** **

Except for BPZ Marine being aSubsidiary of BPZ Exploración, neither Borrower shall form or have anySubsidiary.  BPZ Exploración shall not (a) sell,assign, transfer or otherwise dispose of, or grant or permit to exist any Lienon, any Participations or other capital of BPZ Marine, other than the Lienscreated in favor of the Collateral Agent created pursuant to the ParticipationsPledge or (b) permit the creation of additional Participations in BPZMarine unless such Participations are owned beneficially and legally of recordby BPZ Exploración.

 

## **7.12**                           Loans / Investments

## ** **

Neither Borrower shall make orpermit to exist:

 

### (a)                                  any loans or advances to, or deposits with or otherwise make anyFinancial Debt (including any guarantee) available to or for the benefit of anyother Person (other than the other Borrower), except deposits made inaccordance with the Flow Trust and Permitted Nueva Esperanza Credit Support; or

###  

### (b)                                 any investments in any Person or enterprise.

###  

## **7.13**                           Disposals

## ** **

Neither Borrower shallundertake any spin-off, or sell, transfer, lease or otherwise dispose of anyasset (other than sales of hydrocarbon products in the normal course ofbusiness) whether in a single transaction or in a series of transactions,related or otherwise, other than (i) Permitted License Transfers, (ii) inconnection with the execution, delivery and performance of the Shell Farm-OutAgreement, (iii) obsolete or surplus equipment and (iv) other assetswhich, individually or in the aggregate, are related to transactions not inexcess of $5,000,000 annually.

 

55

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## **7.14**                           Changes in Business, Capital, Charter and Financial Year

## ** **

Neither Borrower shall change:

 

#### (i)                                     its Charter in anymanner which would be inconsistent with the provisions of any TransactionDocument;

####  

#### (ii)                                  its Financial Year; or

####  

#### (iii)                               the nature or scope of the Project or change the nature of its present or contemplatedbusiness or operations.

####  

## **7.15**                           No Merger or Consolidation; Change in Control

## ** **

Neither Borrower shallundertake or permit any Change in Control or any amalgamation or merger with,or acquisition of, another Person or undertake any internal consolidation orreorganization, except in the case of a merger between the Borrowers, providedthat such merger does not affect any Liens created under the SecurityDocuments.

 

## **7.16**                           Project Documents

## ** **

Neither Borrower shall:

 

### (a)                                  terminate, amend, vary, supplement, or grant any waiver with respectto any provision of, any Project Document to which it is a party where to do sowould result in or could be reasonably expected to have a Material AdverseEffect, or

###  

### (b)                                 transfer, assign or novate any of its rights or obligations underany Project Document nor consent to any transfer, assignment or novation of anyProject Document by any other party thereto.

###  

## **7.17**                           Use of Proceeds

## ** **

Neither Borrower shall use orapply the proceeds of any Disbursement under any Facility except in accordancewith Section 4.4(f) (*Use of Proceeds*).

 

## **7.18**                           Leases

## ** **

Neither Borrower shall enterinto any agreement or arrangement to lease any property or equipment of anykind, except (i) Financial Leases, and then only to the extent permittedunder the other provisions of this Section 7 and (ii) otherwise onlyto the extent the aggregate payments under all such agreements or arrangementsdo not exceed the equivalent of ten million Dollars ($10,000,000) in anyFinancial Year.

 

## **7.19**                           Sanctionable Practices

## ** **

No Borrower shall engage in(and shall not authorize or permit any Affiliate or any other Person acting onits behalf to engage in) with respect to the Project, or any transactioncontemplated by this Agreement, any Sanctionable Practice.  Each Borrower further 

 

56

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covenants that should anyFacility Agent notify any Borrower of its concerns that there has been aviolation of the provisions of this Section 7 (*NegativeCovenants*) or of Section 5.1(r) (*SanctionablePractices*) of this Agreement, it shall cooperate in good faith withsuch Facility Agent and its representatives in determining whether such aviolation has occurred, and shall respond promptly and in reasonable detail toany notice from such Facility Agent and shall furnish documentary support for suchresponse upon such Facility Agent’s request.

 

## **7.20**                           Amendment of Action Plan

## ** **

Neither Borrower shall amendthe Action Plan in any material respect without the prior written consent ofeach Facility Agent.

 

# **8.**                                      EVENTS OF DEFAULT

#  

## **8.1**                                 Events of Default

## ** **

Each of the following eventsand occurrences shall constitute an Event of Default under this Agreement andeach Facility Agreement:

 

### (a)                                  **Payments under Finance Documents**

### ** **

#### (i)                                     Any Borrower fails to pay when due, at the place and in the currencyin which such amount is expressed to be payable any principal of, or intereston, any Loan as required by this Agreement and each Facility Agreement, unlesssuch payment (together with any default interest) is made within two (2) BusinessDays of the due date therefor.

####  

#### (ii)                                  Any Borrower fails to pay when due, at the place and in the currencyin which such amount is expressed to be payable any amount as required by theFinance Documents (other than any amounts specified in paragraph (i) aboveof this Section 8.1(a)) unless such payment (together with any defaultinterest) is made within five (5) days of the due date therefor.

####  

### (b)                                 **Other Breach of Transaction Documents**

###  

#### (i)                                     Any party to any Finance Document (other than any Finance Party)fails to observe or perform any of its obligations under such Finance Document(other than any default by any Borrower falling under paragraph (a) aboveof this Section 8.1), and, if capable of being remedied, any such failurecontinues unremedied for a period of thirty (30) days after the date any Lendernotifies the Borrowers of that failure.

####  

#### (ii)                                  Any Borrower or any Authority fails to observe or perform any of itsobligations under any material Authorization, and, if capable of beingremedied, any such failure continues unremedied for a period of thirty (30)days after the date any Lender notifies such Borrower of that failure.

 

57

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#### (iii)                               Any party to any Project Document fails to observe or perform any ofits obligations under such Project Document, which failure could reasonably beexpected to have a Material Adverse Effect, and, if capable of being remedied,any such failure continues unremedied for a period of thirty (30) days afterthe date any Lender notifies the Borrowers of that failure.

####  

### (c)                                  **Representations**

###  

Any representation or warrantymade or confirmed by any Borrower in any Finance Document (including inconnection with the execution of, or any request (including any Disbursement Application) under, any FinanceDocument) is found to be incorrect in any material respect.

 

### (d)                                 **Nationalization**

###  

Any Authority condemns,nationalizes, seizes or otherwise expropriates all or any substantial part ofthe property or assets of any Borrower or of its equity capital, or assumescustody or control of any substantial part of such property or assets or of thebusiness or operations of any Borrower or of its equity capital, or acquiresmajority ownership of any Borrower, or takes any action for the dissolution ordisestablishment of any Borrower or any action that would prevent any Borroweror its officers from carrying on its business or operations or a substantialpart thereof.

 

### (e)                                  **Bankruptcy**

###  

Any of the following events orcircumstances arises:

 

(a)                                  any Borrower

 

#### (i)                                     takes any step (including petition, giving notice to convene orconvening a meeting) for the purpose of making, or proposes or enters into, anyarrangement, assignment or composition with or for the benefit of its creditorsor to enter into any of the proceedings contemplated by Law No. 27809 ofPeru;

####  

#### (ii)                                  ceases or threatens to cease to carry on its business or anysubstantial part of its business; or

####  

#### (iii)                               is unable, or admits in writing its inability to pay its liabilities(including all obligations to pay or repay money) as they fall due or otherwisebecomes insolvent; or

####  

(b)                                 an order is made or an effectiveresolution passed or analogous proceedings taken forany Borrower’s winding up, bankruptcy or dissolution or a petition is presentedor analogous proceedings taken for the winding up or dissolution of anyBorrower or commencing any of the proceedings contemplated by Law No. 27809of Peru;

 

58

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(c)                                  any encumbrancer lawfully takes possession of, or a liquidator,judicial custodian, receiver, administrative receiver or trustee or anyanalogous officer is appointed in respect of the whole or any material part ofthe undertaking or assets of any Borrower or, or an attachment, sequestration,distress or execution (or analogous process) is levied or enforced upon orissued against any of the assets or property of any Borrower or for an amountin excess of five hundred thousand Dollars (US$500,000) (or its equivalent inany other currency or currencies) and is not discharged within thirty (30)days; or

 

(d)                                 any other event occurs which under any applicable Law would have aneffect analogous to any of those events listed in this Section 8.1(e).

 

### (f)                                    **Abandonment; Interruption**

### ** **

Any Borrower ceases to carry onits business; or the operation of any Borrowing Base Asset is interrupted for aperiod in excess of one hundred (100) consecutive days or any periods in theaggregate in excess of one hundred and twenty (120) days during any period oftwelve (12) consecutive months.

 

### (g)                                 **Authorization**

###  

Any Authorization necessary forany Borrower to execute, deliver, perform or observe its obligations under anyTransaction Document to which it is a party, or to construct, own or maintainthe Project, is not obtained when required or is rescinded, terminated, lapsesor otherwise ceases to be in full force and effect or any such Authorization ismaterially impaired or withheld, including with respect to the remittance toany Finance Party or its assignees, in Dollars, of any amounts payable underany Finance Document, and is not restored, reinstated, granted or suchimpairment removed (x) within thirty (30) days of such event, or (y) withrespect to any Authorization not relating to a License Contract or a FinanceDocument, such additional period, not exceeding ninety (90)additional days in aggregate, if (A) the Borrowers are diligentlypursuing the restoration, reinstatement, or grant of suchAuthorization or the removal of such impairment and (B) the failureof such Authorization to be in full force and effect (or to have suchimpairment removed) does not result in any interruption of operations ofeither Borrower and has not had, and could not otherwise reasonably be expectedto have, a Material Adverse Effect.

 

### (h)                                 **Revocation, Etc., of Security Documents**

###  

Any Security Document or any ofits provisions:

 

(a)                                  is revoked, terminated or ceases to be in full force and effect orceases to provide the security intended (including with respect to the priorityintended to be created by such Security Document);

 

(b)                                 becomes unlawful or is declared void; or

 

59

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(c)                                  is repudiated or its validity or enforceability is challenged inwriting by (i) either Borrower or a grantor of any Lien under suchSecurity Document and any such repudiation or challenge continues for a periodof thirty (30) days during which period such repudiation or challenge has noeffect or (ii) Perupetro, except, with respect to this clause (ii), to theextent the Borrowers have asserted their rights against Perupetro within thirty(30) days and are diligently pursuing their remedies in good faith.

 

### (i)                                     **Revocation, Etc., ofTransaction Documents**

###  

Any Transaction Document (otherthan a Security Document) or any of its provisions:

 

#### (i)                                     is revoked, terminated or ceases to be in full force and effect, andthat event, if capable of being remedied, is not remedied to the satisfactionof each of the Facility Agents within thirty (30) days of such event; or

####  

#### (ii)                                  becomes unlawful or is declared void; or

####  

#### (iii)                               is repudiated or the validity or enforceability of any of itsprovisions at any time is challenged in writing by either Borrower or acounterparty to such Transaction Document (other than the Lenders) and suchrepudiation or challenge is not withdrawn (x) within thirty (30) days ofsuch repudiation or challenge (provided that no such thirty (30) day graceperiod shall apply if and when such repudiation or challenge becomes effective)or (y) with respect to such Transaction Document other than a LicenseContract or a Finance Document, such additional period, notexceeding sixty (60) additional days in aggregate, if (A) theBorrowers are diligently pursuing the withdrawal of such repudiation orchallenge or (B) the Borrowers shall have replaced such Transaction Documentwith a contract on terms no less beneficial to the Borrowers than therepudiated or challenged Transaction Document.

####  

### (j)                                     **Cross-Default**

###  

Any Borrower fails to make any payment inrespect of any of its Liabilities (other than the Loans) in excess ofUS$2,000,000 or to perform any of its obligations under any agreement pursuantto which there is outstanding any Liability, and any such failurecontinues for more than any applicable period of grace or any such Liabilitybecomes prematurely due and payable or is placed on demand.

 

### (k)                                  **Sanctionable Practices**

###  

Any Borrower (or any Affiliateor any other Person acting on its behalf) has been found by a judicial processor other official inquiry to have engaged in any Sanctionable Practice withrespect to the Project or any transaction contemplated by this Agreement.

 

60

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### (l)                                     **Peruvian Repayment Restrictions**

###  

#### (i)                                     Any Law is enacted or introduced in Peru which has or couldreasonably be expected to have, in the sole opinion of any Facility Agent, theeffect of prohibiting, restricting or delaying any payment that any Borrower isrequired to make to any Lender under any Finance Document.

####  

#### (ii)                                  A moratorium is called on the payment of interest or the repaymentof principal on international debts of Peru debtors generally or a class ofthem to which any Borrower belongs.

####  

## **8.2**                                 Bankruptcy

## ** **

Notwithstanding anything to thecontrary in this Agreement, ifany Borrower is liquidated or declared bankrupt by a competent court oradministrative authority, thenall the Loans, all interest accrued on it and any other amounts payable to anyFinance Party under this Agreement or any other Finance Document will becomeimmediately due and payable without any presentment, demand, protest or noticeof any kind, all of which each Borrower waives.

 

## **8.3**                                 Consequences of Default

## ** **

On and at any time after theoccurrence of an Event of Default, any Facility Agent may by notice to theBorrowers:

 

### (a)                                  terminate all or part of the relevant Facility and cancel anyundisbursed portion of the Loans of the Lenders thereunder whereupon they shallimmediately be cancelled; and/or

###  

### (b)                                 declare that all or part of the Loans owed to the Lenders under suchFacility, together with accrued interest, and all or any other amounts accruedor outstanding under the Finance Documents owing to the Lenders under suchFacility be immediately due and payable, whereupon they shall becomeimmediately due and payable; and/or

###  

### (c)                                  declare that all or part of the Loans owed to the Lenders under suchFacility, together with any other amounts accrued or outstanding under theFinance Documents owing to such Lenders, be payable on demand, whereupon theyshall immediately become payable on demand by such Facility Agent; and/or

###  

### (d)                                 declare that any and all of the Security Documents have or shallbecome enforceable and exercise any or all of its rights and powers under theFinance Documents to which such Facility Agent is a party and/or all or part ofthe Security constituted under the Security Documents

###  

in each case, without anypresentment, demand or protest of any kind, all of which will be expresslywaived by each Borrower.

 

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# **9.**                                      MISCELLANEOUS

# ** **

## **9.1**                                 Term of Agreement

## ** **

This Agreement shall continuein force until the Final Discharge Date, provided that the indemnities of anyBorrower shall survive repayment of any Loan and termination of this Agreement.

 

## **9.2**                                 Accession, Amendment and Waiver

## ** **

### (a)                                  The parties hereto acknowledge and agree that the Additional SecuredFacility Lenders shall become party hereto upon the execution and delivery bythe Additional Secured Facility Agent of an Accession Agreement.

###  

### (b)                                 Any amendment to, waiver by any Finance Party of any of the terms orconditions of, or consent given by any Finance Party under, this Agreement(including this Section 9.2) or any other Finance Document shall be inwriting, signed by the relevant Finance Parties and by each Borrower.

###  

### (c)                                  In the event that a Lender waives a condition to any Disbursement,each Borrower shall, by receiving the proceeds of such Disbursement, be deemedto have agreed to all of the terms and conditions of such waiver.

###  

## **9.3**                                 Notices

## ** **

Any notice, application orother communication to be given or made under this Agreement or any otherFinance Documents to the Finance Parties or to the Borrowers shall be inwriting.  Except as otherwise provided inthis Agreement or any other Finance Documents, such notice, application orother communication shall duly have been given or made when it is delivered byhand, airmail or facsimile transmission to the party to which it is required orpermitted to be given or made at such party’s address specified below (or inthe relevant Accession Agreement) or at such other address as such partydesignates by notice to the party giving or making such notice, application orother communication.

 

**Forthe Borrowers**:

 

BPZ Exploración &Producción S.R.L.

BPZ Marine Peru S.R.L.

Attention:  General Manager

Manual deFalla #297

San Borja,Lima

Peru

 

Facsimile:  (011-511) 225-3289

 

and

 

62

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BPZ ResourcesInc.

Attention:  Chief Financial Officer or General Counsel

Two Westlake

580 WestlakePark Blvd., Suite 525

Houston, Texas77079

 

Facsimile:(281) 556-6377

 

**ForIFC**:

 

International FinanceCorporation2121 Pennsylvania Avenue, N.W.Washington DC 20433United States of America

 
| Attention: | Director, Oil, Gas, Mining and Chemicals  Department                                                                                                    |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                    |
| Fax:       | 001 202 974 4768                                                                                                                                        |
|       |                                                                                                                                                    |
| Attention: | With a copy (in the case of communications  relating to payments) sent to the attention of the Senior Manager, Department  of Financial Operations, at: |
|       |                                                                                                                                                    |
| Fax:       | 001 202 522 7419                                                                                                                                        |
|       |                                                                                                                                                    |
|       | (IFC Investment Number 24346)                                                                                                                           |

 

 

## **9.4**                                 English Language

## ** **

All documents to be furnishedor communications to be given or made under this Agreement or any other FinanceDocuments shall be in the English language or, if in another language, beaccompanied by a translation into English certified by the Borrowers, whichtranslation shall be the governing version between the Borrowers and theFinance Parties. For the avoidance of doubt, all reasonable costs relating toany translation shall be borne by the Borrowers.

 

## **9.5**                                 Rights, Remedies and Waivers

## ** **

### (a)                                  The rights and remedies of the Finance Parties in relation to anymisrepresentations or breach of warranty on the part of any Borrower shall notbe prejudiced by any investigation by or on behalf of any Finance Party intothe affairs of such Borrower, by the execution or the performance of thisAgreement or the other Finance Documents or by any other act or thing which maybe done by or on behalf of any Finance Party in connection with this Agreementor the other Finance Documents and which might, apart from this Section 9.5,prejudice such rights or remedies.

 

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### (b)                                 No course of dealing or waiver by any Finance Party in connectionwith any condition of Disbursement under this Agreement or any other FinanceDocument shall impair any right, power or remedy of such Finance Party withrespect to any other condition of Disbursement or be construed to be a waiverthereof.

###  

### (c)                                  No action of any Finance Party in respect of any Disbursement shallaffect or impair any right, power or remedy of such Finance Party in respect ofany other Disbursement.  Without limitingthe foregoing, the right of a Finance Party to require compliance with anycondition under this Agreement or any other Finance Document which may bewaived by such Finance Party in respect of any Disbursement is, unlessotherwise notified to the Borrowers by such Finance Party, expressly preservedfor the purposes of any subsequent Disbursement.

###  

### (d)                                 No course of dealing and no delay in exercising, or omission toexercise, any right, power or remedy accruing to the Finance Parties upon anydefault under this Agreement, any other Finance Document or any other agreementshall impair any such right, power or remedy or be construed to be a waiverthereof or an acquiescence therein.  Nosingle or partial exercise of any such right, power or remedy shall precludeany other or further exercise thereof or the exercise of any other right, poweror remedy.  No action of the FinanceParties in respect of any such default, or acquiescence by it therein, shallaffect or impair any right, power or remedy of the Finance Parties in respectof any other default.

###  

### (e)                                  The rights and remedies provided in this Agreement and the otherFinance Documents are cumulative and not exclusive of any other rights orremedies, whether provided by applicable Law or otherwise.

###  

## **9.6**                                 Indemnification

## ** **

### (a)                                  The Borrowers shall, within ten (10) Business Days of demand,indemnify and hold harmless each Finance Party (and its Affiliates), and itsofficers, directors, employees, agents and servants from and against any cost,damage, claim, loss, expense (including documented legal fees) or liabilityimposed on or incurred by that Finance Party or any of its officers, directors,employees, agents and servants as a result of:

###  

#### (i)                                     the occurrence of any Event of Default or Potential Event ofDefault;

####  

#### (ii)                                  a failure by any Borrower to pay any amount due under, or complywith any provision of, any Transaction Document;

####  

#### (iii)                               funding, or making arrangements to fund a Disbursement requested byany Borrower in accordance with a Disbursement Application but not made byreason of the operation of any one or more of the provisions of this Agreementor the relevant Facility Agreement;

####  

#### (iv)                              a Loan (or any part of a Loan) not being prepaid in accordance witha notice of prepayment given by any Borrower; or

 

64

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#### (v)                                 the exercise by any Finance Party of any of its rights or remediesor discretions under any of the Finance Documents to the extent not referred toin paragraphs (i) to (iv) inclusive above.

####  

### (b)                                 Each Borrower acknowledges that each Finance Party is entering intothis Agreement and the other Finance Documents to which such Finance Party isparty, and has acted, solely as a Finance Party for the purposes of thefinancing contemplated hereunder, and not as an advisor, to such Borrower.  Each Borrower represents and warrants that,in entering into the Finance Documents to which it is party, it has engaged,and relied upon advice given to it by, its own legal, financial and otherprofessional advisors and it has not relied on and will not hereafter rely onany advice given to it by any Finance Party.

###  

## **9.7**                           Jurisdiction and Enforcement

## ** **

### (a)                                  This Agreement is governed by, and shall beconstrued in accordance with, the laws of the State of New York, United Statesof America.

###  

### (b)                                 For the exclusive benefit of any of the FinanceParties, each Borrower irrevocably agrees that any legal action, suit orproceeding arising out of or relating to this Agreement may be brought in thecourts of the United States of America located in the Southern District of NewYork or in the courts of the State of New York located in the Borough ofManhattan.  By the execution of thisAgreement, each Borrower irrevocably submits to the non-exclusive jurisdictionof any such court in any such action, suit or proceeding.  Without limitation, each Borrower agrees thatany order or judgment against such Borrower in any such action, suit orproceeding shall be conclusive and may be enforced in any other jurisdiction,including Peru, by suit on the judgment, a certified or exemplified copy ofwhich shall be conclusive evidence of the judgment, or in any other mannerprovided by Law.

###  

### (c)                                  Each Borrower designates, appoints and empowersCT Corporation System, with its address at 111 EighthAvenue, New York, New York 10011,as its authorized agent to receive for and on its behalf service of anysummons, complaint or other legal process in any such action, suit orproceeding in the State of New York.

###  

### (d)                                 Nothing in this Agreement or the FacilityAgreements shall affect the right of each of the Finance Parties to commencelegal proceedings or otherwise sue any Borrower in Peru or any otherappropriate jurisdiction, or concurrently in more than one jurisdiction, or toserve process, pleadings and other papers upon any Borrower in any mannerauthorized by the Laws of any such jurisdiction.

###  

### (e)                                  As long as this Agreement and/or any otherFinance Document remain in force, each Borrower shall maintain a duly appointedagent for the service of any summons, complaint or other legal process in NewYork, New York for purposes of any such legal action, suit or proceeding whichany of the Finance Parties may bring in respect of this Agreement and any otherFinance Document. Each 

###  

### 65

### 

###  

### Borrowershall at all times keep each Facility Agent advised of the identity andlocation of such agent.  Each Borroweragrees that if the appointment of any such agent ceases to be effective and theBorrower fails to appoint a replacement agent each Finance Party shall beentitled to appoint such an agent by notice to such Borrower.  Nothing contained in this Agreement shallaffect the right to serve process in any other manner permitted by Law.

###  

### (f)                                    To the extent that any Borrower may be entitledin any jurisdiction to claim for itself or its assets immunity in respect ofits obligations under any Finance Document from any suit, execution, attachment(whether provisional or final, in aid of execution, before judgment orotherwise) or other legal process or to the extent that in any jurisdictionsuch immunity (whether or not claimed) may be attributed to it or its assets,such Borrower irrevocably agrees not to claim and irrevocably waives suchimmunity to the fullest extent permitted by the Laws of such jurisdiction.

###  

### (g)                                 Each Borrower also consents generally inrespect of any proceedings arising out of or in connection with any FinanceDocument to the giving of any relief or the issue of any process in connectionwith such proceedings including, without limitation, the making, enforcement orexecution against any property whatsoever (irrespective of its use or intendeduse) of any order or judgment which may be made or given in such proceeding.

###  

### (h)                                 To the extent that any Borrower may, in anysuit, action or proceeding brought in any of the courts referred to inparagraph (b) of this Section 9.7 or a court of Peru or elsewherearising out of or in connection with this Agreement or any other FinanceDocument to which the Borrower is a party, be entitled to the benefit of anyprovision of Law requiring any of the Finance Parties in such suit, action orproceeding to post security for the costs of such Borrower (*cautio judicatum solvi*), or to post a bondor to take similar action, such Borrower hereby irrevocably waives suchbenefit, in each case to the fullest extent now or in the future permittedunder the laws of Peru or, as the case may be, the jurisdiction in which suchcourt is located.

###  

### (i)                                     Each Borrower also irrevocably consents, if for any reason theBorrower’s authorized agent for service of process of summons, complaint andother legal process in any such action, suit or proceeding is not present inNew York, New York, to service of such papers being made out of the courtsreferred to in Section 9.7(b) by mailing copies of the papers byregistered air mail, postage prepaid, to such Borrower at its address specifiedin Section 9.3 (*Notices*).  In such a case, the relevant Finance Partyshall also send by facsimile, or have sent by facsimile, a copy of the papersto such Borrower.

###  

### (j)                                     Service in the manner provided in Section 9.7(c), (e) and (i) inany action, suit or proceeding will be deemed personal service, will beaccepted by each Borrower as such and will be valid and binding upon eachBorrower for all purposes of any such action, suit or proceeding.

 

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### (k)                                  Each Borrower irrevocably waives to the fullest extent permitted byapplicable law:

###  

#### (i)                                     any objection which it may have now or in thefuture to the laying of the venue of any action, suit or proceeding in anycourt referred to in this Section;

####  

#### (ii)                                  any claim that any such action, suit orproceeding has been brought in an inconvenient forum;

####  

#### (iii)                               its right of removal of any matter commenced by any Finance Party in thecourts of the State of New York to any court of the United States of America;and

####  

#### (iv)                              any and all rights to demand a trial by jury in any such action, suit orproceeding brought against such Borrower by any Finance Party.

####  

### (l)                                     Each Borrower hereby acknowledges that IFC shall be entitled underapplicable law, including the provisions of the International OrganizationsImmunities Act, to immunity from a trial by jury in any action, suit orproceeding arising out of or relating to this Agreement or the transactionscontemplated hereby brought against IFC in any court of the United States ofAmerica.  Each Borrower hereby waives anyand all rights to demand a trial by jury in any action, suit or proceedingarising out of or relating to this Agreement or the transactions contemplatedby this Agreement, brought against IFC in any forum in which IFC is notentitled to immunity from a trial by jury.

###  

## **9.8**                                 Privileges and Immunities

## ** **

Nothing in this Agreement orany other Finance Document shall be construed as a waiver, renunciation orother modification of any immunities, privileges or exemptions of any Lenderaccorded under such Lender’s articles of agreement, under internationalconvention or under any applicable Law.

 

## **9.9**                                 Successors and Assigns

## ** **

### (a)                                  This Agreement and the other Finance Documents shall bind and inureto the benefit of the respective successors and assigns of the parties hereto,except that neither Borrower may assign or otherwise transfer all or any partof its rights or obligations under this Agreement or any other Finance Documentto which it is a party without the prior consent of each of the FacilityAgents.

###  

### (b)                                 Each Finance Party may sell, transfer, assign, novate or otherwisedispose of all or part of its rights or obligations under this Agreement andany other Finance Document (including by granting of participations) inaccordance with the provisions of its respective Facility Agreement.

 

67

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## **9.10**                           Nature of Finance Parties’ Rights and Obligations

## ** **

The rights and obligations ofthe Finance Parties under this Agreement and the other Finance Documents shallbe in all respects several and the failure of a Finance Party to enforce itsrights or to perform its obligations under this Agreement or any other FinanceDocuments shall in no way affect the rights of the other Finance Parties.  Any amount payable to any Finance Party underthis Agreement or any other Finance Document is a separate and independentobligation.

 

## **9.11**                           Counterparts

## ** **

This Agreement may be executedin several counterparts, each of which shall be deemed an original, but all ofwhich together shall constitute one and the same agreement.

 

## **9.12**                           Effectiveness

## ** **

This Agreement shall becomeeffective as at the date hereof.

 

68

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**IN WITNESS WHEREOF**, the parties hereto, acting through their duly authorizedrepresentatives, have caused this Agreement to executed as of the date firstabove written.

 

69

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**THE BORROWERS**

 

**FOR AND ON BEHALF OF**

**BPZ EXPLORACIÓN & PRODUCCIÓN S.R.L**.

 

 
| By:                        |   /s/ | Manuel Pablo Zúñiga-Pflücker |   |
|----------------------------|-----------------|---------------------------------------------|--------|
|                       | Name:           | Manuel Pablo Zúñiga-Pflücker |
|                       | Title:          | President and CEO                           |
|                       |            |                                        |
|                       |            |                                        |
| **FOR AND ON BEHALF OF**   |
| **BPZ MARINE PERU S.R.L.** |
| ** **                 |
|                       |            |                                        |
| By:                        |   /s/ | Manuel Pablo Zúñiga-Pflücker |   |
|                       | Name:           | Manuel Pablo Zúñiga-Pflücker |
|                       | Title:          | President and CEO                           |

 

----

 

**IFC**

 

**FOR AND ON BEHALF OF**

**INTERNATIONAL FINANCE CORPORATION**

 

 
| By:    |   /s/ | William Bullmer    |   |
|--------|-----------------|--------------------|--------|
|   | Name:           | William Bullmer    |
|   | Title:          | Associate Director |

 

----

 

**SCHEDULE1MAXIMUM FACILITY AMOUNTS**

 

Maximum Facility Amounts:

(US $ Million)

 
| ** **                        | ** ** | ** **            | ** ** | **Additional Secured** | ** ** |
|-----------------------------------|------------|-----------------------|------------|-----------------------------|------------|
| ** **                        | ** ** | **IFC Facility** | ** ** | **Facility**                | ** ** |
| Until Dec 15, 2010                |       | 15.0                  |       | 200.0                       |       |
|                              |       |                  |       |                        |       |
| Dec 16, 2010 — Jun 15,  2011 |       | 12.5                  |       | 166.7                       |       |
|                              |       |                  |       |                        |       |
| Jun 16, 2011 — Dec 15,  2011 |       | 10.0                  |       | 133.3                       |       |
|                              |       |                  |       |                        |       |
| Dec 16, 2011 — Jun 15,  2012 |       | 7.5                   |       | 100.0                       |       |
|                              |       |                  |       |                        |       |
| Jun 16, 2012 — Dec 15,  2012 |       | 5.0                   |       | 66.7                        |       |
|                              |       |                  |       |                        |       |
| Dec 16, 2012 and  thereafter      |       | 0.0                   |       | 0.0                         |       |

 

1

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** **

**SCHEDULE 2ANTI-CORRUPTION GUIDELINES FOR IFC TRANSACTIONS**

** **

Thepurpose of these Guidelines is to clarify the meaning of the terms “CorruptPractices”, “Fraudulent Practices”, “Coercive Practices”, “Collusive Practices”and “Obstructive Practices” in the context of IFC operations.

 

**1.****            ****CORRUPT PRACTICES**

 

A“Corrupt Practice” is the offering, giving, receiving or soliciting, directlyor indirectly, of anything of value to influence improperly the actions ofanother party.

 

**INTERPRETATION**

 

A.            Corrupt practices are understood as kickbacksand bribery.  The conduct in questionmust involve the use of improper means (such as bribery) to violate or derogatea duty owed by the recipient in order for the payor to obtain an undueadvantage or to avoid an obligation. Antitrust, securities and other violations of law that are not of thisnature are excluded from the definition of corrupt practices.

 

B.            It is acknowledged that foreign investmentagreements, concessions and other types of contracts commonly require investorsto make contributions for bona fide social development purposes or to providefunding for infrastructure unrelated to the project. Similarly, investors areoften required or expected to make contributions to bona fide local charities.These practices are not viewed as Corrupt Practices for purposes of thesedefinitions, so long as they are permitted under local law and fully disclosedin the payor’s books and records. Similarly, an investor will not be heldliable for corrupt or fraudulent practices committed by entities thatadminister bona fide social development funds or charitable contributions.

 

C.            In the context of conduct between privateparties, the offering, giving, receiving or soliciting of corporate hospitalityand gifts that are customary by internationally-accepted industry standardsshall not constitute corrupt practices unless the action violates applicablelaw.

 

D.            Payment by private sector persons of thereasonable travel and entertainment expenses of public officials that areconsistent with existing practice under relevant law and internationalconventions will not be viewed as Corrupt Practices.

 

E.             The World Bank Group does not condonefacilitation payments.  For the purposesof implementation, the interpretation of “Corrupt Practices” relating tofacilitation payments will take into account relevant law and internationalconventions pertaining to corruption.

 

1

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**2.****            ****FRAUDULENTPRACTICES**

 

A “Fraudulent Practice” is any action or omission, includingmisrepresentation, that knowingly or recklessly misleads, or attempts tomislead, a party to obtain a financial benefit or to avoid an obligation.

 

**INTERPRETATION**

 

A.            An action, omission, ormisrepresentation will be regarded as made recklessly if it is made withreckless indifference as to whether it is true or false.  Mere inaccuracy in such information,committed through simple negligence, is not enough to constitute a “FraudulentPractice” for purposes of this Agreement.

 

B.            Fraudulent Practices areintended to cover actions or omissions that are directed to or against a WorldBank Group entity.  It also covers Fraudulent Practices directedto or against a World Bank Group member country in connection with the award orimplementation of a government contract or concession in a project financed bythe World Bank Group.  Frauds on other third parties are not condoned but are notspecifically sanctioned in IFC, MIGA, or PRG operations.  Similarly, other illegal behavior is notcondoned, but will not be considered as a Fraudulent Practice for purposes ofthis Agreement.

 

**3.****            ****COERCIVEPRACTICES**

 

A “Coercive Practice” is impairing or harming, or threateningto impair or harm, directly or indirectly, any party or the property of theparty to influence improperly the actions of a party.

 

**INTERPRETATION**

 

A.            Coercive Practices areactions undertaken for the purpose of bid rigging or in connection with public procurement orgovernment contracting or in furtherance of aCorrupt Practice or a Fraudulent Practice.

 

B.            Coercive Practices are threatened or actualillegal actions such as personal injury or abduction, damage to property, orinjury to legally recognizable interests, in order to obtain an undue advantageor to avoid an obligation. It is not intended to cover hard bargaining, theexercise of legal or contractual remedies or litigation.

 

**4.****            ****COLLUSIVEPRACTICES**

 

A “Collusive Practice” is an arrangement between two or moreparties designed to achieve an improper purpose, including to influenceimproperly the actions of another party.

 

2

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**INTERPRETATION**

 

Collusive Practices are actionsundertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a FraudulentPractice.

 

**5.****            ****OBSTRUCTIVE  PRACTICES**

 

An “Obstructive Practice” is (i) deliberatelydestroying, falsifying, altering or concealing of evidence material to theinvestigation or making of false statements to investigators, in order tomaterially impede a World Bank Group investigation into allegations of acorrupt, fraudulent, coercive or collusive practice, and/or threatening,harassing or intimidating any party to prevent it from disclosing its knowledgeof matters relevant to the investigation or from pursuing the investigation, or(ii) acts intended to materially impede the exercise of IFC’s access to contractually required informationin connection with a World Bank Group investigation into allegations of acorrupt, fraudulent, coercive or collusive practice.

 

**INTERPRETATION**

 

Any action legally or otherwise properly taken by aparty to maintain or preserve its regulatory, legal or constitutional rightssuch as the attorney-client privilege, regardless of whether such action hadthe effect of impeding an investigation, does not constitute an ObstructivePractice.

 

**GENERAL INTERPRETATION**

 

Aperson should not be liable for actions taken by unrelated third parties unlessthe first party participated in the prohibited act in question.

 

3

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**SCHEDULE 3**

** **

**AUTHORIZATIONS**

** **

***SECTION 1***

*** ***

***AUTHORIZATIONS ALREADY OBTAINED***

 

1.             **Corporateregistrations**

 

(a)           Memorandum and Articles of Incorporation;

 

(b)           Certified Copies of relevant filings evidencing the currentshareholding of the Borrower.

 

2.             **CorporateApprovals**

 

Resolution of the partners’meeting of the Borrower authorising the Borrower to enter into the FinanceDocuments and detailing the names of the Authorized Representatives that willsign all agreements and documents on behalf of the Borrower.

 

3.             **CurrencyControl**

 

None.

 

4.             **Production of Oil**

 

                Block Z-1 License.

 

5**.****            ****Transportation and Navigation**

 

(i)            BPZ-01 Barge: International Tonnage Certificate issuedby ABS.

 

  (ii)            BPZ-01 Barge: Provisional Registration of NavigationCertificate, issued by the Panama Maritime Authority

 

(iii)          BPZ-01 Barge: Navigation Permit Certificate issued bythe Maritime Authority of Peru (DICAPI).

 

(iv)          BPZ-02 Barge: International Tonnage Certificate,issued by the American Bureau of Shipping.

 

1

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(v)           BPZ-02 Barge: Certificate of Classification, issued bythe American Bureau of Shipping.

 

(vi)          BPZ-02 Barge: International Load Line Certificate,issued by the American Bureau of Shipping.

 

(vii)         BPZ-02 Barge: Provisional Registration of NavigationCertificate, issued by the Panama Maritime Authority.

 

(viii)        BPZ-02 Barge: Annual Safety Inspection issued by thePanama Maritime Authority.

 

(ix)           Na Moku Barge: Certificate of Classification issued bythe International Maritime Bureau, Inc.

 

(x)            Na Moku Barge: Statutory Certificate of Registerissued by the Panama Maritime Authority.

 

(xi)           Na Moku Barge: Certification of Safety Radio andSafety Equipment issued by the Panama Maritime Documentation Services Inc.

 

(xii)          Nu`uanu Barge: Certificate of Classification issued bythe International Maritime Bureau, Inc.

 

(xiii)         Nu`uanu Barge: Class Survey Report issued by theAmerican Bureau of Shipping.

 

(xiv)        Nu`uanu Barge: Certificate of Capability forTransporting Dangerous Goods issued by the Maritime Authority of Perú (DICAPI)

 

(xv)         Nu`uanu Barge: Navigation Permit Certificate issued bythe Maritime Authority of Perú (DICAPI)

 

(xvi)        Nu`uanu Barge: Certificate of Technical andEnvironmental Compliance (Informe Técnico Favorable)

 

(xvii)       Nu`uanu Barge: International Tonnage Certificate,issued by the American Bureau of Shipping.

 

2

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(xix)         Nu`uanu Barge: International Load Line Certificate,issued by the Panama Maritime Documentation Services Inc.

 

(xx)          Nu`uanu Barge: Shipboard Oil Pollution Emergency PlanApproval (SOPEP Certificate) issued by the Panama Maritime DocumentationServices Inc.

 

6.             **Environment**

 

(i)            Resolution No 480-2006-MEM/AAE, whichapproves the Environmental Impact Assessment for the Main Gas Pipeline Projectin the CX-11 Corvina Platform.

 

(ii)           Resolution No 016-2006-MEM/VM, which approves theEnvironmental Impact Assessment for the Drilling Project of up to forty-two gasand/or liquid hydrocarbons wells, Corvina Field, Block Z-1.

 

(iii)          Resolution No 686-2007-MEM/AAE which approves theEnvironmental Management Plan for the Expansion of the Area of Influence andModification of the logistic operations contained in the Environmental ImpactAssessment for the Drilling Project of up to forty-two gas and/or liquidhydrocarbons wells, Corvina Field, Block Z-1.

 

(iv)          Resolution No 261-2008-MEM/AAE which approves theEnvironmental Management Plan for the Well Testing (Production) — EnvironmentalImpact Assessment for the Drilling Project of up to forty-two gas and/or liquidhydrocarbons wells, Corvina Field, Block Z-1.

 

(v)           Official Letter No 0024-2007-EM/DGH/CHL - Permit forGas Flare in CX11-14DST well; issued by the Environmental Directorate of thePeruvian Ministry of Energy and Mining.

 

 (vi)         Official Letter No 1592-2007-EM/DGH/CHL - Permit forGas Flare in CX11-21XD well; issued by the Environmental Directorate of thePeruvian Ministry of Energy and Mining.

 

(vii)         Official Letter No 204-2007-EM/DGH/CHL - Permit forExtended Gas Flare in CX11-21XD well; issued by the Environmental Directorateof the Peruvian Ministry of Energy and Mining.

 

3

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(ix)           Official Letter No 361-2008-EM/DGH - Permit for GasFlare in CX11-18XD; issued by the Environmental Directorate of the PeruvianMinistry of Energy and Mining.

 

(x)            Resolution No 1618-2007-DIGESA-SA — Permit for SewageDischarge pertaining BPZ-01 Barge, issued by the Ministry of Public Health(DIGESA).

 

(xi)           Registration No EPSG-321-07 — Solid Waste ServicesCompany (obtained from ARPE E.I.R.L., BPZ contractor).

 

4

----

 

*SECTION 2*

 

***AUTHORIZATIONS TO BE OBTAINED PRIOR TO FIRST DISBURSEMENT***

 

**A.****           ****Borrowers**

 

1.             **Perfectionof Security**

 

Filings with  Movable Registry of Contracts (*Registro Mobiliario de Contratos)*for Participations Pledgeand Flow Trust.

 

2.             **CurrencyControl**

 

None.

 

5

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##### ** **

##### **SCHEDULE 4INSURANCE**

 

**1.****                                      Operational Insurances — Energy Package:**

 

A.                 COVERAGE:

 

Section A:                                        All Risks of Physical Loss or Damage to property forming part ofBorrower’s operations and/or other Property in the Care, Custody or Control ofthe Assured including Removal of Debris and/or Wreck and for Sue &Labor.  To cover onshore and offshorerisks.

 

Section B:                                          Sabotage and Terrorism

 

Section C:                                          Machinery Breakdown.

 

Section D:                                         Operator’s Extra Expense including Control of Well, Extended andRestoration Cost Redrill, Seepage and Pollution and Clean Up andContainment, Underground Blowout, Making Wells Safe, Removal of Debris/Wreck,Evacuation Expenses, Deliberate Well Firing.

 

Section E:                                           Business Interruption/Extra Expense.

 

Section F:                                           Comprehensive General Liabilities arising out of or incidental tothe Borrower’s operations.

 

Section G:                                          Hull & Machinery

 

Section H:                                         Protection & Indemnity

 

B.                   SUM INSURED/LIMIT OF LIABILITY

 

Section A:                                        The replacement value of the property insured, with a separate andadditional limit of 25% of insured values in respect of Removal of Debrisand/or Wreck, and General Average Salvage Costs.

 

Section B:                                          Full sum insured based on new replacement value.  First loss limit acceptable if based on arisk survey carried out by a professional organization.

 

Section C:                                          Full sum insured based on new replacement value.  First loss limit acceptable if based on arisk survey carried out by a professional organization.

 

Section D:                                         $10,000,000 for producing wells, $40,000,000 for wells being drilled

 

1

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Section E:                                           Gross estimated profits or an amount at least equal to the estimatedDebt Service and Fixed Expenses during the Indemnity Period.

 

Section F:                                           Minimum $5,000,000

 

Section G:                                          Agreed Value (to be confirmed by the Facility Agents)

 

Section H:                                         t.b.a.

 

C.                   DEDUCTIBLES AND/OR EXCESS:

 

Section A:                                        $250,000

 

Section B:                                          $250,000

 

Section C                                             $250,000

 

Section D                                            $375,000 any one accident or occurrence, but US$ 75,000 in respectof Care Custody and Control

 

Section E:                                           Not more than 45 days.

 

Section F:                                           $150,000

 

Section G:                                          No more than $50,000.

 

Section H:                                         t.b.a.

 

**2.**                                      **Miscellaneous**

 

Otherinsurance which:

 

a)                                      is customary or necessary to comply with local or otherrequirements, such as contractual insuring responsibility, Workers’Compensation and Employers’ Liability insurances in relation to all workmenemployed at the Project or in connection with its operation; motor vehicleliability insurance for all vehicles owned, hired, leased,**used or borrowed for use in the Countryin connection with the Project;

 

b)                                     is considered by the Borrowers to be desirable or prudent; or

 

c)                                      is required by local legislation.

 

2

----

 

**3.****                                      General**

 

a)                                      The Borrowers shall procure that each policy effected pursuant tothis Schedule 4 shall provide:

 

(i)                                     that policies are not to be canceled, lapsed, suspended or changedin any material respect without prior written notice (at least 45 days) to theFacility Agents and its agreement obtained, or such lesser period as may bespecified from time to time in respect of war and kindred perils; and

 

(ii)                                  that the Facility Agents are not responsible to the insurers orreinsurers for the payment of insurance premiums or any other obligations ofthe Borrowers.

 

b)                                     Each policy effected pursuant to this Schedule 4:

 

(i)                                     shall be maintained with such reputable insurers and reinsurers asmay be approved by the Facility Agents;

 

(ii)                                  shall be in such form and substance as is consistent with theobligations of the Borrowers under this Schedule 4, as may be approved by theFacility Agents, and

 

(iii)                               shall not include any provision for self-insurance, or anyself-insurance retention except to the extent of the deductibles as specifiedin this Schedule 4.

 

c)                                      The Borrowers shall provide to the Facility Agents such information(including without limitation original policy documents and evidence of premiumpayment) as may be reasonably required.

 

d)                                     If at any time and for any reason any insurance required to be maintainedunder this Schedule 4 is not in full force and effect then, without prejudiceto the rights of the Facility Agents, the Facility Agents shall be entitledthereupon, or at any time while the same is continuing, to procure suchinsurance at the expense of the Borrowers.

 

e)                                      If the Facility Agents reasonably consider that, as a result of amaterial change in the identified risk exposure, any of the terms, conditions,amounts and deductibles of insurances procured pursuant to this Schedule 4 areinadequate or inappropriate, the Facility Agents may require that the Borrowersprocure such amended and/or additional insurances as may be reasonably requiredto cover such material change.

 

3

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**Exhibit A- Form of Accession Agreement**

 

**THIS ACCESSION AGREEMENT**(this “Agreement”) dated                   ,2008 and made between and among:

 

**(1)****                                 BPZ Exploración & Producción S.R.L.**;

 

**(2)****                                 BPZ Marine Peru S.R.L.;**and

 

**(3)****                                 [INSERT ACCEDING LENDER NAME]**  (the “Acceding Lender”)

 

**RECITALS**:

 

(A)                              This Agreement is supplemental to (i) theCommon Terms Agreement dated as of August  15, 2008 (the “Common TermsAgreement”) between the Borrowers and the financial institutions listed thereinas the Lenders and (ii) the Finance Documents referred to in the CommonTerms Agreement.

 

(B)                                This Agreement has been enteredinto to record the accession of the Acceding Lender.

 

IT IS AGREED as follows:

 

**1.****                                     ****Definitions**

 

Words and expressions defined in the CommonTerms Agreement have the same meanings when used in this Agreement.

 

**2.****                                     ****Accession of AccedingLender**

 

(a) The Acceding Lender agrees tobecome, with immediate effect, a party to, and agrees to be bound by the termsof, the Common Terms Agreement and each Finance Document (other than a FacilityAgreement or Fee Letter to which such Acceding Lender is not a party), as ifthe Acceding Lender had originally been party thereto.

 

(b) The Acceding Lender confirms thatits address details for notices in relation to notices are as follows:

 
| Address:   | [          ] |
|------------|----------------------------------------------------------------|
| Fax No:    | [          ] |
| Telex No:  | [          ] |
| Attention: | [          ] |

 

**3.****                                     ****Counterparts**

 

This Agreement may be executed in any numberof counterparts and this has the same effect as if the signatures on thecounterparts were on a single copy of this Agreement.

 

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**4.****                                      Jurisdiction and Enforcement**

 

The provisions of Section 9.7of the Common Terms Agreement are deemed incorporated herein by reference, *mutatis mutandis*, including, without limitation,the choice of the laws of the State of New York, United States of America asthe governing law applicable to this Agreement.

 

IN WITNESS whereof this Agreement has been duly executed and deliveredon the date first above written.

 

Signatories to the AccessionAgreement:

 

**ACCEDINGLENDER**

 

**[INSERT NAME OF ACCEDING LENDER]**

 

 
| By:    |   |   |
|--------|--------|--------|
|   | Name:  |
|   | Title: |

 

**THE BORROWERS**

 

**BPZ EXPLORACIÓN & PRODUCCIÓN S.R.L.**

 

 
| By:    |   |   |
|--------|--------|--------|
|   | Name:  |
|   | Title: |

 

**BPZ MARINE PERU S.R.L.**

 

 
| By:    |   |   |
|--------|--------|--------|
|   | Name:  |
|   | Title: |

 

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**Exhibit B- Form of Certificate of Incumbency and Authority**

 

*[Tobe typed on letterhead of the Borrower]*

 

[*Date*]

 
| To:    | International Finance Corporation                                                                                                   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|
|   | [               ],  as Additional Secured Facility Agent |

 

**SUBJECT:****                                    CERTIFICATE OF INCUMBENCY AND AUTHORITY**

 

Dear Sirs:

 

1.                                       Please refer to:

 

(a)                                  the Common Terms Agreement dated as of August 15, 2008 (the “**Common Terms Agreement**”)between and among,

 

                                                (1) BPZ Exploración & Producción S.R.L and BPZ MarinePeru S.R.L., as the borrowers (the “**Borrowers**”),and

 

                                                (2) International Finance Corporation, and the AdditionalSecured Facility Lenders (following accession thereto); and

 

(b)                                 the Facility Agreements, referred to in the Common Terms Agreement,entered into or to be entered into.

 

2.                                       Expressions defined in the Common Terms Agreement and the FacilityAgreements shall bear the same meanings herein.

 

3.                                       I, the undersigned [President][Chairman of the Board ofDirectors][Director] of [each of] the Borrower[s], duly authorized by its Boardof Directors, hereby certify that the following are the names, offices and truespecimen signatures of the Persons, any one of whom is and will continue to beuntil each of the Facility Agents has received actual written notice from theBorrower[s] that they or any of them no longer continue to be) authorized, onbehalf of the Borrower[s] individually:

 

(a)                                  to sign each of the Finance Documents to which it is a party(including, without limitation, the Common Terms Agreement and each LoanAgreement), any Disbursement Applications, certifications, letters or otherdocuments to be provided under any such Finance Documents and any otheragreements to which the Borrowers and the Finance Parties are party; and

 

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Schedule B

 

(b)                                 to take any other action required or permitted to be taken by theBorrowers under the Finance Documents to which they are a party or any otheragreement to which the Borrowers and the Finance Parties may be party inconnection therewith:

 

| **NAME** | ** ** | **OFFICE** | ** ** | **SPECIMEN SIGNATURE** |
|----------|------------|------------|------------|------------------------|
|     |       |       |       |                   |
|     |       |       |       |                   |
|     |       |       |       |                   |

 

**IN WITNESS WHEREOF**, I have signed my name on the date first above written.

 

Yours faithfully,

 

[*insert name of Borrowers*]

 

 
| By:    |   |                                  |
|--------|--------|---------------------------------------|
|   | Name:  |
|   | Title: | [President]                           |
|   |   | [Chairman of  the Board of Directors] |
|   |   | [Director]                            |
|        |        |                                       |  |

 

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**Exhibit C- Form of Letter to Auditors**

 

*[Tobe typed on letterhead of each Borrower]*

 

[*Date*]

 

[*Name of Auditors*]

[*Address*]

 

Dear Sirs:

 

We hereby authorise and request you to giveto [NAME OF THE FACILITY AGENT] (the “**Facility Agent**”),all such information as it may reasonably request with regard to the financialstatements, both audited and unaudited, which we have agreed to furnish underthe terms of the Common Terms Agreement dated as of August 15, 2008 (the “**Common Terms Agreement**”) between and among the undersigned,International Finance Corporation, and the Additional Secured Facility Lenders(upon accession thereto).

 

We authorise you to send our audited accountsto the Facility Agent, together with all such related confirmations,certificates or reports, in each case, to enable us to satisfy the reportingrequirements set forth in Section 6.16 of the Common Terms Agreement.  When submitting such audited accounts to theFacility Agent you are also requested to send, at the same time, a copy of yourfull report on such accounts.

 

For our records, please ensure that you sendto us a copy of every letter which you receive from the Facility Agentimmediately upon receipt and a copy of each reply made by you immediately uponthe issue thereof.

 

Yours faithfully,

 

**[Name of Borrower]**

 

 
| By:    |                       |   |
|--------|----------------------------|--------|
|   | Authorized  Representative |

 

 

Enclosure: Common Terms Agreement

 

Copy to:

 

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**Exhibit D - Form of Appointment of Service of Process Letter**

 

[Date]

 

International Finance Corporation

Additional Secured Facility Agent

 

Dear Sirs:

 

Reference is made to (a) the Common Terms Agreement dated as of August 15,2008 (the “Common Terms Agreement”) between and among, (1) BPZ Exploración &Producción S.R.L. and BPZ Marine Peru S.R.L., as the borrowers (the “Borrowers”),and (2) International Finance Corporation and the Additional SecuredFacility Lenders (following accession thereto) (the “Lenders”).  Unless otherwise defined herein, capitalizedterms used herein shall have the meaning specified in the Common TermsAgreement.

 

Pursuant to Section 9.7(c) of the Common Terms Agreement,each Borrower has irrevocably designated and appointed the undersigned, [          ],with offices currently located at [          ],asits authorized agent to receive for and on its behalf service of process in anylegal action or proceeding with respect to the Common Terms Agreement and theother Finance Documents to which it is a party brought in the courts of theState of New York.

 

The undersigned hereby informs you that it has irrevocably acceptedthat appointment as process agent as set forth in Section 9.7(c) ofthe Common Terms Agreement from               (1) until                      (2) andagrees with you that the undersigned (i) shall inform the Lenders promptlyin writing of any change of its address in New York, (ii) shall performits obligations as such process agent in accordance with the relevantprovisions of the Common Terms Agreement, and (iii) shall forward promptlyto the Borrowers any legal process received by the undersigned in its capacityas process agent.

 

As process agent, the undersigned and its successor or successors agreeto discharge the above-mentioned obligations and will not refuse fulfillment ofsuch obligations as provided under the Common Terms Agreement.

 
|   | Very truly yours,                                                                                                                                                                                                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                   |
|   | [                                              ] |
|   |                                                                                                                                                                                                                                                                                   |
|   | By                                                                                                                                                                                                                                                                                     |   |
|   |                                                                                                                                                                                                                                                                                   | Title: |

 

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(1) Insertdate of effectiveness of appointment.

(2) Insertdate which is six months after final maturity date of loans.

 

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**Exhibit E- Form of Distribution Request**

 

*[Tobe typed on letterhead of the Borrower]*

 

[*Date*]

 
| To:    | International Finance Corporation                                 |
|--------|-------------------------------------------------------------------|
|   | [Name of Facility Agent for Additional  Secured Facility Lenders] |

 

**SUBJECT:****                                    DISTRIBUTION REQUEST**

 

Dear Sirs:

 

1.                                       Please refer to:

 

(a)                                  the Common Terms Agreement dated as of August 15, 2008 (the “**Common Terms Agreement**”) between and among,

 

(1)                                  BPZ Exploración & Producción S.R.L. (“**BPZExploración**”) and BPZ Marine Peru S.R.L. (“**BPZ Marine**”)as the borrowers (the “**Borrowers**”),and

 

(2)                                  International Finance Corporation and the Additional SecuredFacility Lenders (following accession thereto), as the Lenders; and

 

(b)                                 the Facility Agreements, referred to in the Common Terms Agreement,entered into or to be entered into.

 

Expressions defined in theCommon Terms Agreement and the Facility Agreements shall bear the same meaningsherein.

 

2.                                       This is to inform you that [BPZ Exploración] [BPZ Marine] plans a[distribution of dividends] [payment in respect of Permitted PartnerSubordinated Loans] [return of capital] to [its holders of Participations] [thelender of such Permitted Partner Subordinated Loans] in the aggregate amount of                            (            ),such [distribution] [payment] to be made on or about                   ,      (1). Pursuant to Section 7.1 of the Common Terms Agreement, suchBorrower hereby certifies that, as at the date hereof:

 

(a)                                  after giving effect to such action, no Event of Default or PotentialEvent of Default has occurred and is continuing; and

 

(b)                                 each of the LOL, LOF and Interest Cover is in compliance with theMinimum Level therefor and the Debt to Equity Ratio is greater than 65:35.

 

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(1)Insert date occurring after an Interest PaymentDate and within ten (10) days thereafter.

 

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Schedule E

 

3.                                       [BPZ Exploración] [BPZ Marine] undertakes not to give effect to theproposed distribution or payment or any part thereof if, at the time of sodoing or after giving effect to it, [BPZ Exploración] [BPZ Marine] could notcertify the matters in section 2 of this certification.

 

 
|   | Yours truly,                                                                |
|--------|-----------------------------------------------------------------------------|
|   |                                                                        |
|   | [BPZ  Exploración & Producción S.R.L./BPZ Marine S.R.L.] |
|   |                                                                        |
|   |                                                                        |
|   | By                                                                          |   |
|   |                                                                        | Authorized Representative |

 

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