Document:

Exhibit 10.2

BPZ Energy, Inc.

Tax-Qualified Stock Option Agreement

This
Tax-Qualified Stock Option Agreement (the “Agreement”) is entered into and made
as of                 
(the “Date of Grant”), between BPZ Energy, Inc., a Colorado corporation,
including, without limitation, any of its affiliated entities (the “Company”),
and                 
(the “Optionee”). The Optionee currently serves as the                 
of the Company and the Company desires, pursuant to its 2005 Long-Term
Incentive Compensation Plan (the “Plan”), to afford an incentive to the
Optionee by granting an option to purchase shares of Company’s common stock, no
par value (the “Common Stock”).

1)             Option
Grant. The Corporation hereby irrevocably grants to the Optionee the option
to purchase                    
shares of Common Stock (the “Option”), subject to adjustment as provided in Section 11
hereof, on the terms and conditions set forth herein. This option is intended
to qualify as an “Incentive Stock Option” pursuant to Section 422 of the
U.S. Internal Revenue Code of 1986, as amended (the “Code”), to the extent such
tax treatment may be available. The Company does not represent or warrant that
any such tax treatment will be accorded to the Optionee.

2)             Exercise
Price. The exercise price of the Common Stock covered by the Option shall
be $     per
share, subject to adjustment as provided in Section 11 hereof.

3)             Term
of Option. Unless earlier terminated pursuant to the provisions of this
Agreement or the Plan, the unexercised portion of the Option shall expire and
cease to be exercisable at 5:00 p.m. Houston, Texas Time on the tenth
anniversary of the Date of Grant (“Expiration Date”). In no event shall any
other provision of this Agreement serve to extend the exercise period of the Option
beyond the Expiration Date.

4)             Vesting
of Option. The Option is exercisable only to the extent it is vested. Subject
to adjustment pursuant to Section 5, below, the shares subject to the
Option shall vest cumulatively in           
equal installments of           
shares each. The first such installment shall vest on                
and the remaining       installments shall vest on
each of the succeeding         anniversaries
of the Date of Grant, provided that the Optionee shall have been continuously
employed by, or providing services to, the Company since the Date of Grant,
subject to adjustment pursuant to Section 5, below. If the Optionee is
serving as a consultant to the Company, vesting shall occur under this section
if the Optionee is available to perform the consulting services contemplated
under this Agreement on each such anniversary date, whether or not such
services are actually being performed on these dates. In the event of a
question as to whether the Optionee is available to perform services to the
Company, the decision of the Compensation Committee of the Board of Directors
of the Company (the “Committee”), in its sole discretion, shall be binding. All
or any part of the vested portion of the Option may be exercised at any time in
accordance with this Agreement.

5)             Termination
of Service. In the event of termination of the Optionee’s service
relationship (whether as an employee, director, advisor or consultant) with the
Company before

 

the
Optionee has exercised the Option in full or the Option has expired pursuant to
Section 3, the following provisions shall apply. The terms, provisions and
definitions of this Section 5 shall have application only for purposes of
this Agreement and shall not have general application to the Optionee’s termination
of service with the Company.

a.               Termination by
Death or Disability. If the Optionee’s service relationship is terminated
as a result of the Optionee’s death or disability (as defined in the Plan),
then the Optionee shall, solely for the purpose of determining vesting under
this Agreement, be credited with service through the next vesting date and the
vested portion of the Option shall remain exercisable for a period of one year
from the date of the Optionee’s termination of service by reason of death or
disability.

b.              Retirement from
the Company. If the Optionee retires as an employee or director of the
Company upon the attainment of at least 60 years of age with at least five
continuous years of service to the Company, the Option shall become fully
vested and shall remain exercisable for a period of one year from the date of
retirement.

c.               Termination for
Cause. In the event that the Optionee’s service to the Company is
terminated for Cause (as herein defined), the unexercised portion of the Option,
whether vested of unvested, shall immediately be terminated. To the extent that
any exercise of the Option has not been completed or has been suspended pending
the outcome of a review of the Optionee’s status with the Company by the
Committee, such pending exercise may be cancelled. In the event of such
cancellation, any payment tendered to the Company for exercise of the Option
shall be returned to the Optionee. Solely for the purposes of this Agreement, “Cause”
is defined as (i) willful misconduct in the performance of or material
breach of duties required of the Optionee which results or is expected to
result in material harm to the Company, (ii) conviction of a felony, (iii) the
material breach of any corporate policy or code of conduct established by the
Company, including the improper disclosure of confidential information about
the Company, which results or is expected to result in material harm to the
Company, or (iv) willful conduct that the Optionee knows or should know is
materially injurious to the Company. The Committee is solely responsible for
the decision to terminate the Optionee for Cause and the Optionee must be
notified in writing of such termination.

d.              Termination
Related to Unsatisfactory Performance. If the Optionee’s service relation­ship
is terminated by the Company for Unsatisfactory Performance (as herein
defined), and the Optionee has completed at least one year of service to the
Company, the Optionee shall, solely for purpose of determining vesting under
this Agreement, be credited with an additional four months of service, and the
vested portion of the Option shall remain exercisable for a period of 180 days
from the date of termination. If the Optionee has not completed one year of
service to the Company, the unvested portion of the Option shall immediately
expire and cease to be exercisable. Any vested portion of the Option shall
remain exercisable for a period of 180 days from the date of termination. Solely
for the purposes of this Agreement, “Unsatisfactory Performance” is defined as (i) failure
to meet the minimum requirements of the position, (ii) excessive
absenteeism, (iii) insubordinate behavior, (iv) behavior which is
disruptive to the work environment

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or detrimental to the
performance of other employees, (v) negative comments about the Company to
investors, customers or others outside the Company, (vi) breach of any
corporate policy or code of conduct established by the Company, or (vii) failure
to perform the duties and responsibilities required of the Optionee at substantially
the same level of performance previously established by the Optionee. The
Optionee may be terminated for Unsatisfactory Performance by his or her direct
supervisor. In the event that the Optionee does not agree with the reasons for
such termination, the Optionee may appeal to the Committee, whose decision in
the matter shall be final. To the extent that the actions giving rise to
termination of service may qualify as both for “Cause” and “Unsatisfactory
Performance,” the Committee shall have the sole discretion to determine which
category shall apply to such termination.

e.               Other
Termination by the Company. If the Optionee’s service relationship to the
Company is terminated by the Company for any reason other than Cause or
Unsatisfactory Performance, the Option shall become fully vested and shall be
exercisable for a period of one year after the date of termination. For
purposes of this Agreement, if the Optionee resigns for Good Reason, such
resignation shall be regarded as termination by the Company for purposes of
this section. Solely for purposes of this Agreement, “Good Reason” shall mean
termination by Optionee of Optionee’s employment with or service to the Company
in connection with or due to (i) a significant change in the nature,
status, or scope of the Optionee’s duties, responsibilities, or authorities, (ii) a
permanent change and relocation of Optionee’s principal place of employment
with the Company, which is more than twenty-five miles away from the prior
location, (iii) a breach by the Company of any material provision of any
Employment Agree­ment with the Optionee, which, if correctable, remains
uncorrected for thirty days following written notice of such breach by Optionee
to the Company, (iv) material diminution in the Optionee’s compensation or
participation in bonus, stock option, incentive award, employee benefits or
other compensation plans provided by the Company for executives with comparable
duties or responsibilities, (v) a material misrepresentation pertaining to
the Company by any of the Company’s officers or directors, or (xi) engagement
by the Company in any illegal or unethical activity or a request by any of the
Company’s officers or directors that the Optionee engage in or ignore any
illegal or unethical activity.

f.                 Voluntary
Resignation. If the Optionee voluntarily resigns or otherwise voluntarily
terminates his service relationship to the Company other than for Good Reason,
the unvested portion of the Option shall immediately expire and cease to be
exercisable. Any vested and unexercised portion of the Option shall remain
exercisable for a period of 180 days from the date of voluntary resignation.

g.              Conduct by the
Optionee. Notwithstanding the voluntary resignation or other termination of
the Optionee, if the Company determines, prior to the delivery of shares upon
any exercise of the Option, that the Optionee has engaged in conduct which
would justify termination for Cause or Unsatisfactory Performance, the vesting
terms and exercise period of any portion of the Option for which the

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exercise has not been
completed may be retroactively adjusted to the date of termination pursuant to
the relevant provisions of this Agreement.

h.              Employment
Agreements. If the Optionee is a party to any employment or consulting
agreement with the Company which provides for treatment of the Option that is
inconsistent with the provisions of this Section 5 or any other provision
of this Agreement, whichever agreement provides the more favorable treatment to
the Optionee shall prevail.

i.                  Expiration of
Option. If the Option is not exercised in accordance with the provisions of
this Agreement during the period such Option remains exercisable pursuant to
this Section 5, the Option shall expire and cease to be exercisable. In no
event shall any of the above provisions serve to extend the period of exercise
beyond the Expiration Date.

6)             Method
of Exercise. The Optionee shall exercise the Option by delivering a signed,
written notice to the Company which states the election to exercise all or any
part of the vested shares under this Agreement and the number of shares of
Common Stock being purchased with respect thereto. Payment of the exercise
price for the shares so purchased and any required tax withholding shall be
made by any of the following methods:

a.               Payment in Cash.
The Optionee may deliver the required payment or payments in cash, check or
cash equivalent. The Optionee is not required to deliver certified funds, but
the Company may delay delivery of the shares of Common Stock being purchased
under the Option until it has received collected funds.

b.              Immediate Sales
Proceeds. “Immediate Sales Proceeds” (sometimes referred to as “Broker-Assisted
Cashless Exercise”), shall mean the assignment in a form acceptable to the
Company of the proceeds of a sale of some or all of the shares acquired upon
the exercise of the Option pursuant to a program and/or procedure conducted
through a registered securities brokerage firm approved by the Company. Such
procedure shall comply with the provisions of Regulation T of the Federal
Reserve System, if applicable. The Company reserves the right, in its sole
discretion, to decline to approve any such program and/or procedure.

c.               Tender of
Company Shares. The Optionee may tender to the Company Qualified Shares of
the Company’s Common Stock having a Fair Market Value not less than the
exercise price plus the amount of any required tax withholding. For purposes of
this Agreement, “Qualified Shares” means shares of the Company’s Common Stock
which have either (i) been owned by the Optionee for more than six months
or (ii) were not acquired, directly or indirectly, from the Company. For
purposes of this Agreement, “Fair Market Value” is defined as the closing
market price on the last trading day immediately preceding the date that
written notice of exercise is delivered to the Company. Notwithstanding the
foregoing, the Option may not be exercised by tender of Company shares if such
tender would constitute a violation of the provisions of any law or regulation,
or would conflict with any agreement or policy regarding the redemption of the
Company’s Common Stock.

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d.              Promissory Note.
The Company may, in its sole discretion, permit the Optionee to satisfy the
obligation for the exercise price and any required tax withholding through the
delivery of a promissory note or other deferred payment arrangement. The terms
of such promissory note shall be set by the Committee, in its sole discretion,
and must comply with the terms of the Plan and all laws and regulations. The
Company reserves the right, in its sole discretion, to decline to accept any
such promissory note or other arrangement in payment for the obligations under
this Agreement.

e.               Net Issuance of
Shares. If the shares to be issued upon exercise of the Option are not registered
under the Securities Act of 1933 (the “Act”) or are otherwise restricted as to
resale by the Optionee, the Optionee may satisfy the obligation for payment of
the exercise price and any required tax withholding through a reduction in the
number of shares otherwise issuable upon exercise. Such reduction shall be
based on the Fair Market Value of such shares.

f.                 Combination.
Any of the foregoing methods that are permitted by their terms may be used by
the Optionee in any combination.

7)             Tax
Status and Withholding. The provisions of the Code pertaining to Incentive
Stock Options are highly complex, subject to varying interpretation and can
have significant beneficial or adverse tax implications for the Optionee. The
Company does not represent or warrant that this option qualifies as an
Incentive Stock Option. The Optionee is strongly urged to consult with the
Optionee’s own tax advisors regarding the tax effects of this Option and the
requirements necessary to obtain favorable income tax treatment under Section 422
of the Code and the adverse consequences of other sections of the Code,
including the alternative minimum tax. The Company specifically disclaims any
undertaking or obligation to advise the Optionee of these tax consequences and
will not under any circumstances provide tax advice to the Optionee.

Under
Section 422 of the Code, the aggregate fair market value of all Company
Common Stock which the Optionee first becomes eligible to exercise during any
calendar year may be limited by statute to $100,000 or to such other amount as
may be contained in the Code. To the extent this Option, together with any
other Incentive Stock Options granted to the Optionee by the Company, exceeds
this aggregate limit, it is the intent of this Agreement that the number of
shares which are in excess of this aggregate limit shall have the same terms
and conditions as all other Option shares, but shall be treated as a
Non-Qualified Stock Option. The Optionee further understands that the exercise
price of Stock subject to this Option has been set by the Committee at a price
that the Committee determined to be not less than 100% (or, if the Optionee, at
the Grant Date, owned more than 10% of the total combined voting power of the
Company’s outstanding voting securities, 110%) of the Fair Market Value, as
determined in accordance with the Plan, of a share of Common Stock on the Grant
Date. The Optionee further understands and agrees that the Company shall not be
liable or responsible for any additional tax liability incurred by the Optionee
in the event that the Internal Revenue Service for any reason determines that
this Option does not qualify as an Incentive Stock Option within the meaning of
the Code.

The
Optionee is specifically advised that, in order to qualify for tax treatment as
an Incentive Stock Option, the exercise period upon termination of employment
may be substantially shorter (generally 90 days, except in the case of
disability) than the periods

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provided in Section 5
of this Agreement. To the extent that any part of the Option does not qualify
for Incentive Stock Option treatment under this or any other provision of the
Agreement, it is the intent of the Agreement that the shares subject to the
Option which do not so qualify shall have the same terms and conditions as all
other shares under the Agreement, but shall be treated as a Non-Qualified Stock
Option.

If
the Optionee satisfies all of the requirements of the Code, this Option may be
exempt from regulations requiring the Company to withhold income or other taxes
upon exercise. However, the Company does not represent or warrant that the
Optionee will qualify for such tax treatment. To the extent the Company
determines, based on the guidance of its tax advisors, that the Optionee is
subject to withholding of income or other taxes upon exercise, the Company
shall notify the Optionee of the amount of such required withholding at the
time the Optionee delivers notice of the intent to exercise the Option to the
Company.

8)             Delivery
of Shares; Registration. The Company shall deliver the shares of Common
Stock upon exercise of the Option to the Optionee as soon as practicable, but
in any event within ten (10) days of the date of exercise. The Company
intends that the shares issuable pursuant to this Option will be registered
under a Form S-8 Registration Statement (“Form S-8”)
which covers the Plan. If such Form S-8 is effective, the Optionee
has been or will be given and hereby acknowledges, prior to any exercise of the
Option, the receipt of a Prospectus, which describes the Plan and provides
disclosures about the Company’s business and financial information, including
risk factors related to the investment in its Common Stock. The Company does
not represent or warrant that such Form S-8 will be effective on the
date of exercise. If the shares issuable upon exercise are not registered under
a Form S-8 or are otherwise restricted as to resale by the Optionee
under the provisions of the Act, the share certificates which are issued upon
exercise of this Option will carry a restrictive legend, which will indicate
that they have not been registered under the Act or are otherwise restricted as
to resale. Shares which are not registered or are otherwise restricted may not
be readily marketable and the Optionee should be aware that he or she may be
required to bear the risk of an investment in the Common Stock for a period of
at least one year, if not indefinitely. In this event, the Company may require
the Optionee to make certain representations related to the investment in the
Company’s Common Stock. The Optionee is urged to seek financial and/or legal
advice to assess the financial considerations and potential risk of the
decision to exercise the Option.

9)             Notice
of Sales upon Disqualifying Disposition. If any exercise of this Option
qualifies for treatment as an Incentive Stock Option under the Code and the
Optionee disposes of any of the shares acquired pursuant to such exercise (i) within
one year from the date of exercise or (ii) within two years from the Date
of Grant (the “Disposition Periods”), the Optionee shall notify the Company
within 15 days of such disposition. If the Company has not received such
notice, it may require the Optionee to provide it with an affidavit that the
shares acquired upon exercise are still owned as of the end of such Disposition
Periods or that the Optionee has disposed of such shares. If the Optionee fails
to provide this affidavit upon request, the Company may suffer the loss of
valuable tax benefits. The parties to this Agreement hereby agree that if the
Optionee fails to provide such affidavit, the Optionee shall be liable to the
Company for an amount equal to 35% of the gain on the date of the written
notice of exercise.

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Such
gain shall be calculated as the positive difference between the Fair Market
Value of the Common Stock and the exercise price of such Option.

10)           Non-Transferability
of Option. This Option is not transferable by the Optionee other than (i) by
will or the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order, or (iii) as may be permitted under policies that
may be adopted by the Committee in its sole discretion. The Option is
exercisable only by the Optionee during his or her lifetime. Except as
permitted by the preceding sentence, this Option, or any right granted under
this Agreement, shall not be transferred, assigned, pledged, hypothecated or
disposed of in any other way (whether by operation of law or otherwise), or be
subject to execution, attachment or similar process. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of the Option or of such other
rights contrary to the provisions hereof, or to subject the Option and such
other rights to execution, attachment or similar process, shall be null and
void.

11)           Adjustment
Provisions. In accordance with the provisions of the Plan, in the event of
changes in the Common Stock by reason of any stock split, combination of
shares, stock dividend, reclassification, merger, consolidation,
reorganization, recapitalization or similar adjustment prior to the delivery by
the Company of all the shares covered by the Option, the Company shall make
appropriate adjustments to the number, class and purchase price of the shares
which remain subject to the Option. The Company shall notify the Optionee in
writing of any such adjustments.

12)           Change
in Status of the Company. In accordance with the provisions of the Plan,
any Corporate Transaction or Change of Control (as such terms are defined in
the Plan) shall result in the modification of certain provisions of this Option.
Unless the Option granted pursuant to this Agreement is assumed in a
transaction to which Section 425(a) of the Code applies, if the
Company shall (i) merge or consolidate with another corporation under
circumstances where the Company is not the surviving corporation, (ii) sell
all, or substantially all, of its assets, or (iii) liquidate or dissolve,
then the Option shall terminate on the date and immediately prior to the time
such merger, consolidation, sale, liquidation or dissolution becomes effective
or is consummated, provided that the Optionee shall have the right immediately
prior to the effectiveness or consummation of such merger, consolidation, sale,
liquidation or dissolution, to exercise any or all of the vested portion of the
Option, unless such Option has otherwise expired or been terminated pursuant to
its terms or the terms of the Plan or this Agreement. In the event of such
merger, consolidation, sale, liquidation or dissolution, any portion of an outstanding
Option which would have vested within eighteen months of the date on which such
merger, consolidation, sale, liquidation or dissolution becomes effective or is
consummated shall vest immediately prior to the effectiveness or consummation
of such merger, consolidation, sale, liquidation or dissolution and shall be
part of the vested portion of the Option which the Optionee may exercise. Furthermore,
the Board of Directors of the Company, in its sole discretion, shall be
permitted under this Agreement to provide for immediate and full vesting of
this Option in contemplation of and prior to consummation of any change in
status of the Company.

13)           No
Rights as a Shareholder. The Optionee shall have no rights and privileges
of a shareholder of the Company with respect to any of the shares subject to
the Option unless and

 7
 

 

until
such shares shall have been issued to the Optionee. Except as may be
specifically provided in the Plan or this Agreement, including, without
limitation, the provisions of Section 11 hereof, the Optionee shall have
no right to receive dividends on shares which have not been exercised, nor
shall any adjustment be made for cash dividends or similar rights granted prior
to the date of exercise of the Option.

14)           No
Obligation to Maintain Relationship or Grant Options. Nothing contained in
this Agreement or this Option shall obligate the Company in any way to continue
the employment or other relationship of the Optionee to the Company, nor shall
it interfere in any way with the right of the Company to terminate the
employment or services of the Optionee at any time. The Optionee also agrees
and acknowledges that the grant of stock options is completely discretionary
and that the Company is under no obligation to make any future grants of stock
options to the Optionee.

15)           Incorporation
of Plan Provisions. This Agreement is being entered into pursuant to, and
is subject to, the terms and provisions of the Plan, a copy of which has been
provided to the Optionee. All of the terms and provisions of the Plan are
incorporated herein by reference. Any amendments to the Plan which are made
subsequent to the Date of Grant shall only be binding if they are to the
benefit of the Optionee. If the terms of this Agreement and the Plan are in
conflict, such conflict shall generally be resolved in favor of the Optionee,
subject to the final decision of the Committee, which decision shall be binding
on the Optionee. All matters of administration or interpretation of this
Agreement or the Plan shall be determined by the Committee or by management of
the Company to the extent such duties have been delegated by the Committee.

16)           Notices.
Notices and other communications provided for herein shall be in writing and
shall be hand delivered or sent by certified mail, return receipt requested, to
the appropriate address set forth below, subject to written notice of change of
address given by any party to the other party, and such notices and
communications shall be deemed to be given upon dispatch:

If to the Company, to:

BPZ Energy, Inc.

Attn:  Chief Executive Officer

580 Westlake Park Blvd, Suite 525

Houston, Texas 77079

(281) 556-6200 (Phone)

(281) 556-6377 (Fax)

If
to the Optionee, at the address stated below his or her
signature on this Agreement.

15.           Governing Law; Severability. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without regard to conflicts of laws. If any provision of this
Agreement or the Plan shall hereafter be held to be invalid, unenforceable or
illegal, in whole or in part, in any jurisdiction under any circumstances for
any reason, such

 8
 

 

provision shall be
reformed to the minimum extent necessary to cause such provision to be valid
and enforceable, while preserving the intent of the parties. If such provision
cannot be so reformed, such provision shall be severed from the Agreement or
the Plan and the remaining terms and provisions of the Agreement and the Plan
shall remain valid and enforceable to the maximum extent possible.

16.           Successors. The provisions of
this Agreement shall be binding upon, and inure to the benefit of, all
successors and assigns of the Company, and all successors and assigns of the
Optionee, including, without limitation, his or her estate and the executors,
administrators or trustees thereof, his or her heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of the Optionee.

17.           Modification. This Agreement,
together with the Plan, constitutes the entire agreement and understanding
between the parties hereto and when executed supersedes any prior oral or
written agreements and understandings related to the Option. This Agreement may
be modified or amended only by a written instrument executed by the Company and
the Optionee, except as specifically provided to the contrary by the Plan or
this Agreement.

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

 

	
  

  	
  COMPANY

  
	
   

  	
   

  	
   

  
	
     

  	
  By:

  	
   

  
	
     

  	
   

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
     

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     

  	
  By:

  	
   

  
	
     

  	
   

  	
  Optionee Name

  
	
     

  	
   

  	
  Optionee Address

  
	
     

  	
   

  	
  Optionee City, State, Zip

  

 

 9Exhibit 10.3

BPZ Energy, Inc.

Non-Qualified Stock Option Agreement

This
Non-Qualified Stock Option Agreement (the “Agreement”) is entered into and made
as of                
(the “Date of Grant”), between BPZ Energy, Inc., a Colorado corporation,
including, without limitation, any of its affiliated entities (the “Company”),
and                
(the “Optionee”). The Optionee currently serves as the                
of the Company and the Company desires, pursuant to its 2005 Long-Term
Incentive Compensation Plan (the “Plan”), to afford an incentive to the
Optionee by granting an option to purchase shares of Company’s common stock, no
par value (the “Common Stock”).

1)             Option
Grant. The Corporation hereby irrevocably grants to the Optionee the option
to purchase         shares of Common Stock
(the “Option”), subject to adjustment as provided in Section 10 hereof, on
the terms and conditions set forth herein. This option is intended to qualify
as an “Incentive Stock Option” pursuant to Section 422 of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”), to the extent such tax treatment
may be available. The Company does not represent or warrant that any such tax
treatment will be accorded to the Optionee.

2)             Exercise
Price. The exercise price of the Common Stock covered by the Option shall
be $      per
share, subject to adjustment as provided in Section 10 hereof.

3)             Term
of Option. Unless earlier terminated pursuant to the provisions of this
Agreement or the Plan, the unexercised portion of the Option shall expire and
cease to be exercisable at 5:00 p.m. Houston, Texas Time on the tenth
anniversary of the Date of Grant (“Expiration Date”). In no event shall any
other provision of this Agreement serve to extend the exercise period of the
Option beyond the Expiration Date.

4)             Vesting
of Option. The Option is exercisable only to the extent it is vested. Subject
to adjustment pursuant to Section 5, below, the shares subject to the
Option shall vest cumulatively in        
equal installments of       shares each. The first
such installment shall vest on                
and the remaining       installments shall vest on
each of the succeeding                 
anniversaries of the Date of Grant, provided that the Optionee shall have been
continuously employed by, or providing services to, the Company since the Date
of Grant, subject to adjustment pursuant to Section 5, below. If the
Optionee is serving as a consultant to the Company, vesting shall occur under
this section if the Optionee is available to perform the consulting services
contemplated under this Agreement on each such anniversary date, whether or not
such services are actually being performed on these dates. In the event of a
question as to whether the Optionee is available to perform services to the
Company, the decision of the Compensation Committee of the Board of Directors
of the Company (the “Committee”), in its sole discretion, shall be binding. All
or any part of the vested portion of the Option may be exercised at any time in
accordance with this Agreement.

5)             Termination
of Service. In the event of termination of the Optionee’s service
relationship (whether as an employee, director, advisor or consultant) with the
Company before

 

the
Optionee has exercised the Option in full or the Option has expired pursuant to
Section 3, the following provisions shall apply. The terms, provisions and
definitions of this Section 5 shall have application only for purposes of
this Agreement and shall not have general application to the Optionee’s
termination of service with the Company.

a.               Termination by
Death or Disability. If the Optionee’s service relationship is terminated
as a result of the Optionee’s death or disability (as defined in the Plan),
then the Optionee shall, solely for the purpose of determining vesting under
this Agreement, be credited with service through the next vesting date and the
vested portion of the Option shall remain exercisable for a period of one year
from the date of the Optionee’s termination of service by reason of death or
disability.

b.              Retirement from
the Company. If the Optionee retires as an employee or director of the
Company upon the attainment of at least 60 years of age with at least five
continuous years of service to the Company, the Option shall become fully
vested and shall remain exercisable for a period of one year from the date of
retirement.

c.               Termination for
Cause. In the event that the Optionee’s service to the Company is
terminated for Cause (as herein defined), the unexercised portion of the
Option, whether vested of unvested, shall immediately be terminated. To the
extent that any exercise of the Option has not been completed or has been
suspended pending the outcome of a review of the Optionee’s status with the
Company by the Committee, such pending exercise may be cancelled. In the event
of such cancellation, any payment tendered to the Company for exercise of the
Option shall be returned to the Optionee. Solely for the purposes of this
Agreement, “Cause” is defined as (i) willful misconduct in the performance
of or material breach of duties required of the Optionee which results or is
expected to result in material harm to the Company, (ii) conviction of a
felony, (iii) the material breach of any corporate policy or code of
conduct established by the Company, including the improper disclosure of
confidential information about the Company, which results or is expected to
result in material harm to the Company, or (iv) willful conduct that the
Optionee knows or should know is materially injurious to the Company. The
Committee is solely responsible for the decision to terminate the Optionee for
Cause and the Optionee must be notified in writing of such termination.

d.              Termination
Related to Unsatisfactory Performance. If the Optionee’s service relation­ship
is terminated by the Company for Unsatisfactory Performance (as herein
defined), and the Optionee has completed at least one year of service to the
Company, the Optionee shall, solely for purpose of determining vesting under
this Agreement, be credited with an additional four months of service, and the
vested portion of the Option shall remain exercisable for a period of 180 days
from the date of termination. If the Optionee has not completed one year of
service to the Company, the unvested portion of the Option shall immediately
expire and cease to be exercisable. Any vested portion of the Option shall
remain exercisable for a period of 180 days from the date of termination. Solely
for the purposes of this Agreement, “Unsatisfactory Performance” is defined as (i) failure
to meet the minimum requirements of the position, (ii) excessive
absenteeism, (iii) insubordinate behavior, (iv) behavior which is
disruptive to the work environment

 2
 

 

or detrimental to the
performance of other employees, (v) negative comments about the Company to
investors, customers or others outside the Company, (vi) breach of any
corporate policy or code of conduct established by the Company, or (vii) failure
to perform the duties and responsibilities required of the Optionee at
substantially the same level of performance previously established by the
Optionee. The Optionee may be terminated for Unsatisfactory Performance by his
or her direct supervisor. In the event that the Optionee does not agree with
the reasons for such termination, the Optionee may appeal to the Committee,
whose decision in the matter shall be final. To the extent that the actions
giving rise to termination of service may qualify as both for “Cause” and “Unsatisfactory
Performance,” the Committee shall have the sole discretion to determine which
category shall apply to such termination.

e.               Other
Termination by the Company. If the Optionee’s service relationship to the
Company is terminated by the Company for any reason other than Cause or
Unsatisfactory Performance, the Option shall become fully vested and shall be
exercisable for a period of one year after the date of termination. For
purposes of this Agreement, if the Optionee resigns for Good Reason, such
resignation shall be regarded as termination by the Company for purposes of
this section. Solely for purposes of this Agreement, “Good Reason” shall mean
termination by Optionee of Optionee’s employment with or service to the Company
in connection with or due to (i) a significant change in the nature,
status, or scope of the Optionee’s duties, responsibilities, or authorities, (ii) a
permanent change and relocation of Optionee’s principal place of employment
with the Company, which is more than twenty-five miles away from the prior
location, (iii) a breach by the Company of any material provision of any
Employment Agree­ment with the Optionee, which, if correctable, remains
uncorrected for thirty days following written notice of such breach by Optionee
to the Company, (iv) material diminution in the Optionee’s compensation or
participation in bonus, stock option, incentive award, employee benefits or
other compensation plans provided by the Company for executives with comparable
duties or responsibilities, (v) a material misrepresentation pertaining to
the Company by any of the Company’s officers or directors, or (xi) engagement
by the Company in any illegal or unethical activity or a request by any of the
Company’s officers or directors that the Optionee engage in or ignore any
illegal or unethical activity.

f.                 Voluntary
Resignation. If the Optionee voluntarily resigns or otherwise voluntarily
terminates his service relationship to the Company other than for Good Reason,
the unvested portion of the Option shall immediately expire and cease to be
exercisable. Any vested and unexercised portion of the Option shall remain
exercisable for a period of 180 days from the date of voluntary resignation.

g.              Conduct by the
Optionee. Notwithstanding the voluntary resignation or other termination of
the Optionee, if the Company determines, prior to the delivery of shares upon
any exercise of the Option, that the Optionee has engaged in conduct which
would justify termination for Cause or Unsatisfactory Performance, the vesting
terms and exercise period of any portion of the Option for which the

 3
 

 

exercise has not been
completed may be retroactively adjusted to the date of termination pursuant to
the relevant provisions of this Agreement.

h.              Employment
Agreements. If the Optionee is a party to any employment or consulting
agreement with the Company which provides for treatment of the Option that is
inconsistent with the provisions of this Section 5 or any other provision
of this Agreement, whichever agreement provides the more favorable treatment to
the Optionee shall prevail.

i.                  Expiration of
Option. If the Option is not exercised in accordance with the provisions of
this Agreement during the period such Option remains exercisable pursuant to
this Section 5, the Option shall expire and cease to be exercisable. In no
event shall any of the above provisions serve to extend the period of exercise
beyond the Expiration Date.

6)             Method
of Exercise. The Optionee shall exercise the Option by delivering a signed,
written notice to the Company which states the election to exercise all or any
part of the vested shares under this Agreement and the number of shares of
Common Stock being purchased with respect thereto. Payment of the exercise
price for the shares so purchased and any required tax withholding shall be
made by any of the following methods:

a.               Payment in Cash.
The Optionee may deliver the required payment or payments in cash, check or
cash equivalent. The Optionee is not required to deliver certified funds, but
the Company may delay delivery of the shares of Common Stock being purchased
under the Option until it has received collected funds.

b.              Immediate Sales
Proceeds. “Immediate Sales Proceeds” (sometimes referred to as “Broker-Assisted
Cashless Exercise”), shall mean the assignment in a form acceptable to the
Company of the proceeds of a sale of some or all of the shares acquired upon
the exercise of the Option pursuant to a program and/or procedure conducted
through a registered securities brokerage firm approved by the Company. Such
procedure shall comply with the provisions of Regulation T of the Federal
Reserve System, if applicable. The Company reserves the right, in its sole
discretion, to decline to approve any such program and/or procedure.

c.               Tender of
Company Shares. The Optionee may tender to the Company Qualified Shares of
the Company’s Common Stock having a Fair Market Value not less than the
exercise price plus the amount of any required tax withholding. For purposes of
this Agreement, “Qualified Shares” means shares of the Company’s Common Stock
which have either (i) been owned by the Optionee for more than six months
or (ii) were not acquired, directly or indirectly, from the Company. For
purposes of this Agreement, “Fair Market Value” is defined as the closing
market price on the last trading day immediately preceding the date that written
notice of exercise is delivered to the Company. Notwithstanding the foregoing,
the Option may not be exercised by tender of Company shares if such tender
would constitute a violation of the provisions of any law or regulation, or
would conflict with any agreement or policy regarding the redemption of the
Company’s Common Stock.

 4
 

 

d.              Promissory Note.
The Company may, in its sole discretion, permit the Optionee to satisfy the
obligation for the exercise price and any required tax withholding through the delivery
of a promissory note or other deferred payment arrangement. The terms of such
promissory note shall be set by the Committee, in its sole discretion, and must
comply with the terms of the Plan and all laws and regulations. The Company
reserves the right, in its sole discretion, to decline to accept any such
promissory note or other arrangement in payment for the obligations under this
Agreement.

e.               Net Issuance of
Shares. If the shares to be issued upon exercise of the Option are not
registered under the Securities Act of 1933 (the “Act”) or are otherwise
restricted as to resale by the Optionee, the Optionee may satisfy the
obligation for payment of the exercise price and any required tax withholding
through a reduction in the number of shares otherwise issuable upon exercise. Such
reduction shall be based on the Fair Market Value of such shares.

f.                 Combination.
Any of the foregoing methods that are permitted by their terms may be used by
the Optionee in any combination.

7)             Tax
Status and Withholding. The provisions of the Code pertaining to Stock
Options are complex, subject to varying interpretation and can have significant
tax implications for the Optionee. The Optionee is strongly urged to consult
with the Optionee’s own tax advisors regarding the tax effects of the exercise
of this Option. The Company specifically disclaims any undertaking or
obligation to advise the Optionee of these tax consequences and will not under
any circumstances provide tax advice to the Optionee.

Upon
receipt of a written notice of exercise from the Optionee, the Company shall
advise the Optionee of the amount of any required income or other tax
withholding due upon exercise. The Optionee must make arrangements to pay this
amount in addition to the aggregate exercise price of the option shares in
order to complete the exercise. The amount of the withholding shall be computed
by the Company based on the guidance of its tax advisors and shall be presumed
to be correct. If the Optionee is not in agreement with such guidance, he or
she may submit an opinion from a qualified tax advisor for the consideration of
the Company. The Committee shall review such opinion and make a final decision,
which decision shall be binding on the Optionee.

8)             Delivery
of Shares; Registration. The Company shall deliver the shares of Common
Stock upon exercise of the Option to the Optionee as soon as practicable, but
in any event within ten (10) days of the date of exercise. The Company
intends that the shares issuable pursuant to this Option will be registered
under a Form S-8 Registration Statement (“Form S-8”)
which covers the Plan. If such Form S-8 is effective, the Optionee
has been or will be given and hereby acknowledges, prior to any exercise of the
Option, the receipt of a Prospectus, which describes the Plan and provides
disclosures about the Company’s business and financial information, including
risk factors related to the investment in its Common Stock. The Company does
not represent or warrant that such Form S-8 will be effective on the
date of exercise. If the shares issuable upon exercise are not registered under
a Form S-8 or are otherwise restricted as to resale by the Optionee
under the provisions of the Act, the share certificates which are issued upon
exercise of this Option will carry a restrictive legend, which will indicate
that they have not been registered under the Act or are otherwise restricted as
to resale. Shares which are not

 5
 

 

registered
or are otherwise restricted may not be readily marketable and the Optionee
should be aware that he or she may be required to bear the risk of an
investment in the Common Stock for a period of at least one year, if not
indefinitely. In this event, the Company may require the Optionee to make
certain representations related to the investment in the Company’s Common Stock.
The Optionee is urged to seek financial and/or legal advice to assess the
financial considerations and potential risk of the decision to exercise the
Option.

9)             Non-Transferability
of Option. This Option is not transferable by the Optionee other than (i) by
will or the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order, or (iii) as may be permitted under policies that
may be adopted by the Committee in its sole discretion. The Option is exercisable
only by the Optionee during his or her lifetime. Except as permitted by the
preceding sentence, this Option, or any right granted under this Agreement,
shall not be transferred, assigned, pledged, hypothecated or disposed of in any
other way (whether by operation of law or otherwise), or be subject to
execution, attachment or similar process. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option or of such other rights
contrary to the provisions hereof, or to subject the Option and such other
rights to execution, attachment or similar process, shall be null and void.

10)           Adjustment
Provisions. In accordance with the provisions of the Plan, in the event of
changes in the Common Stock by reason of any stock split, combination of
shares, stock dividend, reclassification, merger, consolidation,
reorganization, recapitalization or similar adjustment prior to the delivery by
the Company of all the shares covered by the Option, the Company shall make
appropriate adjustments to the number, class and purchase price of the shares
which remain subject to the Option. The Company shall notify the Optionee in
writing of any such adjustments.

11)           Change
in Status of the Company. In accordance with the provisions of the Plan,
any Corporate Transaction or Change of Control (as such terms are defined in
the Plan) shall result in the modification of certain provisions of this Option.
Unless the Option granted pursuant to this Agreement is assumed in a
transaction to which Section 425(a) of the Code applies, if the
Company shall (i) merge or consolidate with another corporation under
circumstances where the Company is not the surviving corporation, (ii) sell
all, or substantially all, of its assets, or (iii) liquidate or dissolve,
then the Option shall terminate on the date and immediately prior to the time
such merger, consolidation, sale, liquidation or dissolution becomes effective
or is consummated, provided that the Optionee shall have the right immediately
prior to the effectiveness or consummation of such merger, consolidation, sale,
liquidation or dissolution, to exercise any or all of the vested portion of the
Option, unless such Option has otherwise expired or been terminated pursuant to
its terms or the terms of the Plan or this Agreement. In the event of such
merger, consolidation, sale, liquidation or dissolution, any portion of an
outstanding Option which would have vested within eighteen months of the date
on which such merger, consolidation, sale, liquidation or dissolution becomes
effective or is consummated shall vest immediately prior to the effectiveness
or consummation of such merger, consolidation, sale, liquidation or dissolution
and shall be part of the vested portion of the Option which the Optionee may
exercise. Furthermore, the Board of Directors of the Company, in its sole
discretion, shall be permitted under this Agreement to provide for immediate
and full

 6
 

 

vesting
of this Option in contemplation of and prior to consummation of any change in
status of the Company.

12)           No
Rights as a Shareholder. The Optionee shall have no rights and privileges
of a shareholder of the Company with respect to any of the shares subject to
the Option unless and until such shares shall have been issued to the Optionee.
Except as may be specifically provided in the Plan or this Agreement,
including, without limitation, the provisions of Section 11 hereof, the
Optionee shall have no right to receive dividends on shares which have not been
exercised, nor shall any adjustment be made for cash dividends or similar
rights granted prior to the date of exercise of the Option.

13)           No
Obligation to Maintain Relationship or Grant Options. Nothing contained in
this Agreement or this Option shall obligate the Company in any way to continue
the employment or other relationship of the Optionee to the Company, nor shall
it interfere in any way with the right of the Company to terminate the
employment or services of the Optionee at any time. The Optionee also agrees
and acknowledges that the grant of stock options is completely discretionary
and that the Company is under no obligation to make any future grants of stock
options to the Optionee.

14)           Incorporation
of Plan Provisions. This Agreement is being entered into pursuant to, and
is subject to, the terms and provisions of the Plan, a copy of which has been
provided to the Optionee. All of the terms and provisions of the Plan are
incorporated herein by reference. Any amendments to the Plan which are made
subsequent to the Date of Grant shall only be binding if they are to the
benefit of the Optionee. If the terms of this Agreement and the Plan are in
conflict, such conflict shall generally be resolved in favor of the Optionee,
subject to the final decision of the Committee, which decision shall be binding
on the Optionee. All matters of administration or interpretation of this
Agreement or the Plan shall be determined by the Committee or by management of
the Company to the extent such duties have been delegated by the Committee.

15)           Notices.
Notices and other communications provided for herein shall be in writing and
shall be hand delivered or sent by certified mail, return receipt requested, to
the appropriate address set forth below, subject to written notice of change of
address given by any party to the other party, and such notices and
communications shall be deemed to be given upon dispatch:

If to the Company, to:

BPZ Energy, Inc.

Attn:  Chief Executive Officer

580 Westlake Park Blvd, Suite 525

Houston, Texas 77079

(281) 556-6200 (Phone)

(281) 556-6377 (Fax)

If
to the Optionee, at the address stated below his or her
signature on this Agreement.

 7
 

 

15.           Governing Law; Severability. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without regard to conflicts of laws. If any provision of this
Agreement or the Plan shall hereafter be held to be invalid, unenforceable or
illegal, in whole or in part, in any jurisdiction under any circumstances for
any reason, such provision shall be reformed to the minimum extent necessary to
cause such provision to be valid and enforceable, while preserving the intent
of the parties. If such provision cannot be so reformed, such provision shall
be severed from the Agreement or the Plan and the remaining terms and
provisions of the Agreement and the Plan shall remain valid and enforceable to
the maximum extent possible.

16.           Successors. The provisions of
this Agreement shall be binding upon, and inure to the benefit of, all
successors and assigns of the Company, and all successors and assigns of the
Optionee, including, without limitation, his or her estate and the executors,
administrators or trustees thereof, his or her heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of the Optionee.

17.           Modification. This Agreement,
together with the Plan, constitutes the entire agreement and understanding
between the parties hereto and when executed supersedes any prior oral or
written agreements and understandings related to the Option. This Agreement may
be modified or amended only by a written instrument executed by the Company and
the Optionee, except as specifically provided to the contrary by the Plan or
this Agreement.

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

	
  

  	
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     

  	
  By:

  	
   

  
	
     

  	
   

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
     

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     

  	
  By:

  	
   

  
	
     

  	
   

  	
  Optionee Name

  
	
     

  	
   

  	
  Optionee Address

  
	
     

  	
   

  	
  Optionee City, State, Zip

  

 

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