Document:

EXHIBIT
10.15

 

CONFORMED COPY

 

 

INVESTMENT
NUMBER 24346

 

Loan
Agreement

 

between

 

BPZ EXPLORACIÓN & PRODUCCIÓN S.R.L.

 

BPZ MARINE PERU S.R.L

 

and

 

INTERNATIONAL FINANCE CORPORATION

 

Dated as
of August 15, 2008

 

 

 

TABLE OF
CONTENTS

 

	
  Article/

  Section

  	
   

  	
  Item

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS AND INTERPRETATION

  	
  1

  
	
  Section 1.01.

  	
  Definitions

  	
  1

  
	
  Section 1.02.

  	
  Interpretation

  	
  5

  
	
  Section 1.03.

  	
  Business Day Adjustment

  	
  5

  
	
  Section 1.04.

  	
  Common Terms Agreement

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE IFC FACILITY

  	
  5

  
	
  Section 2.01.

  	
  The IFC Facility

  	
  5

  
	
  Section 2.02.

  	
  Disbursement Procedure

  	
  6

  
	
  Section 2.03.

  	
  Interest

  	
  6

  
	
  Section 2.04.

  	
  Default Rate Interest

  	
  7

  
	
  Section 2.05.

  	
  Repayment

  	
  8

  
	
  Section 2.06.

  	
  Prepayment

  	
  8

  
	
  Section 2.07.

  	
  Fees

  	
  9

  
	
  Section 2.08.

  	
  Currency and Place of Payments

  	
  10

  
	
  Section 2.09.

  	
  Allocation of Partial Payments

  	
  10

  
	
  Section 2.10.

  	
  Increased Costs

  	
  10

  
	
  Section 2.11.

  	
  Unwinding Costs

  	
  10

  
	
  Section 2.12.

  	
  Suspension or Cancellation by IFC

  	
  11

  
	
  Section 2.13.

  	
  Cancellation by the Borrower

  	
  12

  
	
  Section 2.14.

  	
  Taxes

  	
  12

  
	
  Section 2.15.

  	
  Expenses

  	
  12

  
	
  Section 2.16.

  	
  Illegality of Participation

  	
  13

  
	
  Section 2.17

  	
  Mitigation

  	
  14

  

 

i

 

	
  ARTICLE III

  	
  CONDITIONS OF DISBURSEMENT

  	
  14

  
	
  Section 3.01.

  	
  Conditions of Disbursement

  	
  14

  
	
  Section 3.02.

  	
  Borrower’s Certification

  	
  14

  
	
  Section 3.03.

  	
  Conditions for IFC Benefit

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  MISCELLANEOUS

  	
  15

  
	
  Section 4.01.

  	
  Saving of Rights

  	
  15

  
	
  Section 4.02.

  	
  Notices

  	
  15

  
	
  Section 4.03.

  	
  English Language

  	
  17

  
	
  Section 4.04.

  	
  Term of Agreement

  	
  17

  
	
  Section 4.05.

  	
  Disclosure of Information

  	
  17

  
	
  Section 4.06.

  	
  Successors and Assignees

  	
  17

  
	
  Section 4.07.

  	
  Amendments, Waivers and Consents

  	
  18

  
	
  Section 4.08.

  	
  Governing Law

  	
  18

  
	
  Section 4.09.

  	
  Dispute Resolution

  	
  18

  
	
  Section 4.10.

  	
  Counterparts

  	
  18

  

 

ii

 

LOAN
AGREEMENT

 

LOAN AGREEMENT (the “Agreement”) dated as of August 15, 2008 between BPZ
EXPLORACIÓN & PRODUCCIÓN S.R.L. (“BPZ Exploración”
and a “Borrower”), incorporated as a limited
liability company registered in Peru, BPZ MARINE PERU S.R.L. (“BPZ Marine” and a “Borrower” and,
together with BPZ Exploración, the “Borrowers”) and
INTERNATIONAL FINANCE CORPORATION, an international organization established by
Articles of Agreement among its member countries, including Peru (“IFC”).

 

RECITALS

 

IFC, the Borrowers and the
Additional Secured Facility Lenders (upon accession thereto) have entered or
will enter into a Common Terms Agreement dated as of the date hereof (the “Common Terms Agreement”) which sets out, inter  alia,
certain terms and conditions under which the Lenders shall provide revolving
credit facilities to the Borrowers; and

 

This Agreement sets out
the additional terms and conditions under which IFC shall provide the IFC
Facility to the Borrowers.

 

ARTICLE I

Definitions and Interpretation

 

Section 1.01.                             Definitions.  Wherever used in this Agreement, terms
defined in the Common Terms Agreement (as defined below) shall have the same
meanings herein unless otherwise defined herein.  In addition, the following terms have the
meanings opposite them:

 

“Available Amount”                                                                                  as
of the date of calculation, the lesser of (i) the Maximum Facility Amount
(as cancelled or reduced from time to time) less the principal amount of
Loans outstanding as of the date of calculation, and (ii) the Maximum
Available Amount as of the date of calculation;

 

“Business Day”                                                                                                          a
day when banks are open for business in New York, New York and Lima, Peru or,
solely for the purpose of determining the Interest Rate other than pursuant to Section 2.03(d)(ii),
London, England;

 

“Disbursement”                                                                                                          any
disbursement of the Loans;

 

1

 

“IFC Fee Letter”                                                                                                         the
letter agreement dated as of the date hereof between IFC and the Borrowers;

 

“Increased Costs”                                                                                              the
amount certified in an Increased Costs Certificate to be the net incremental
costs of, or reduction in return to, IFC or any participant who has acquired a
participation in the Loans in connection with the making or maintaining of the
Loans that result from:

 

(i)                                     any
change in any applicable law or regulation or directive (whether or not having
the force of law) or in its interpretation or application by any Authority
charged with its administration; or

 

(ii)                                  compliance
with any request from, or requirement of, any central bank or other monetary or
other Authority;

 

which, in either
case, after the date of this Agreement (or, in the case of a participant that
has acquired a participation in the Loans, the date of its participation
agreement):

 

(A)                              imposes,
modifies or makes applicable any reserve, special deposit or similar
requirements against assets held by, or deposits with or for the account of, or
loans made by, IFC or such participant;

 

(B)                                imposes
a cost on IFC or such participant as a result of IFC or such participant having
made the Loans (or acquired such participation) or reduces the rate of return
on the overall capital of IFC or such participant that it would have achieved,
had IFC or such participant not made the Loans (or acquired such
participation);

 

(C)                                changes
the basis of taxation on payments received by IFC or such participant in
respect of the Loans or 

 

2

 

such participation
(otherwise than by a change in taxation of the overall net income of IFC or
such participant imposed by the jurisdiction of its incorporation or in which
it books such participation or in any political subdivision of any such
jurisdiction; or

 

(D)                               imposes
on IFC or such participant any other condition regarding the making or
maintaining of the Loans or such participation;

 

but excluding any
incremental costs of making or maintaining a participation in the Loans that
are a direct result of the relevant participant having its principal office in
Peru or having or maintaining a permanent office or establishment in Peru, if
and to the extent that permanent office or establishment acquires that
participation.

 

“Increased Costs

Certificate”                                                                                                                                    a
certificate provided from time to time by IFC (based, if appropriate, on a
certificate to IFC from any participant who has acquired a participation in the
Loans, if Increased Costs affect its participation) certifying:

 

(i)                                     the
circumstances giving rise to the Increased Costs;

 

(ii)                                  that
the costs of IFC or, as the case may be, that participant, have increased or
the rate of return of either of them has been reduced;

 

(iii)                               that either IFC or such
participant has, in IFC’s opinion, exercised reasonable efforts to minimize or
eliminate the relevant increase or reduction, as the case may be; and

 

(iv)                              the
amount of Increased Costs;

 

3

 

“Interest Determination

Date”                                                                                                                                                                 except
as otherwise provided in Section 2.03 (d) (ii) (Interest), the second Business Day before the beginning of
each Interest Period;

 

“Interest Payment Date”                                                              June 30
and December 31 in each year;

 

“Interest Period”                                                                                                      each
period of six (6) months, except in the case of any Loan that is made on a
date other than an Interest Payment Date, when it means the period beginning on
the date on which that Loan is made and ending on the day immediately before
the next following Interest Payment Date;

 

“Interest Rate”                                                                                                                for
any Interest Period, the rate at which interest is payable on the Loan during
that Interest Period, determined in accordance with Section 2.03 (Interest);

 

“LIBOR”                                                                                                                                                the
British Bankers’ Association (“BBA”) interbank offered rates for deposits in
Dollars which appear on the relevant page of the Reuters Service
(currently page LIBOR01) or, if not available, on the relevant pages of
any other service (such as Bloomberg Financial Markets Service) that displays
such BBA rates; provided that if BBA for any reason ceases (whether permanently
or temporarily) to publish interbank offered rates for deposits in Dollars, “LIBOR”
shall mean the rate determined pursuant to Section 2.03 (d) (Interest);

 

“Loan”                                                                                                                                                         the
principal amount of each borrowing under the IFC Facility or, as the context
requires, the principal amount from time to time outstanding of such borrowing;
provided that, for the avoidance of doubt, and subject to Section 3.3 (Rollover Loans) of the Common Terms Agreement, on each
Interest Payment Date all Loans (including Rollover Loans) outstanding on such
Interest Payment Date shall (to the extent not repaid) be consolidated into a
single Loan on such Interest Payment Date;

 

“Relevant Change”                                                                                         has
the meaning specified in Section 2.16 (Illegality of
Participation);

 

“Relevant Spread”                                                                                             2.75%
per annum;

 

4

 

“Revenue Account”                                                                                   the
bank account entitled “BPZ Exploración—Revenue Account” (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; and

 

“Taxes”                                                                                                                                                     any
present or future taxes, withholding obligations, duties and other charges of
whatever nature levied by any Authority.

 

Section 1.02.                             Interpretation.  This Agreement shall be interpreted in
accordance with Section 1.3 (Interpretation)
of the Common Terms Agreement.

 

Section 1.03.                             Business Day
Adjustment. 
(a) When an Interest Payment Date is not a Business Day, then such
Interest Payment 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).

 

(b)                                 When the day on or by which a payment (other
than a payment of principal or interest) is due to be made is not a Business
Day, that payment shall be made on or by the next Business Day in that calendar
month (if there is one) or the preceding Business Day (if there is not).

 

Section 1.04.                             Common Terms
Agreement. 
This Agreement constitutes the IFC Loan Agreement referred to in the
Common Terms Agreement and the provisions of the Common Terms Agreement are
hereby incorporated herein by this reference. 
In the event of any conflict between the provisions of this Agreement
and the Common Terms Agreement, the provisions of this Agreement shall prevail.

 

ARTICLE II

 

The IFC Facility

 

Section 2.01.                             The IFC Facility.  (a) Subject to the provisions of this
Agreement and the Common Terms Agreement, IFC agrees to make available to the
Borrowers a revolving loan facility of up to fifteen million Dollars
($15,000,000) (the “IFC Facility”).

 

(b)                                 Each
Loan under the IFC Facility may be utilized only for the purposes set forth in Section 2.1
(The Project) of the Common Terms Agreement.

 

(c)                                  The
Borrowers’ obligations under this Agreement and the other Finance Documents are
joint and several.

 

5

 

Section 2.02.                             Disbursement
Procedure.

 

(a)                                  The
Borrowers may request Disbursements during the Availability Period by
delivering to IFC, at least ten (10) Business Days prior to the proposed
date of disbursement, a Disbursement Application substantially in the form of
Schedule 1.

 

(b)                                 Each
Disbursement shall be made by IFC at a bank in New York, New York for further
credit to the Revenue Account or such other bank account in Peru acceptable to
IFC, all as specified by the Borrowers in the relevant Disbursement request.

 

(c)                                  Each
Disbursement shall be made in an amount of (i) not less than five million
Dollars ($5,000,000) or (ii) if less, the Available Amount.

 

(d)                                 The
Borrowers shall deliver to IFC a receipt, substantially in the form of Schedule
2, within five (5) Business Days following each Disbursement.

 

(e)                                  On
each Interest Payment Date on which there are any Loans outstanding, the
Borrowers shall be conclusively deemed to have delivered to IFC a Rollover
Request in accordance with Section 3.3 (Rollover
Loans) of the Common Terms Agreement.

 

Section 2.03.                             Interest.  Subject to the provisions of Section 2.04
(Default Rate Interest), the Borrower
shall pay interest on each Loan in accordance with this Section 2.03:

 

(a)                                  During
each Interest Period, each Loan shall bear interest at the applicable Interest
Rate for that Interest Period.

 

(b)                                 Interest
on each Loan shall accrue from day to day, be prorated on the basis of a
360-day year for the actual number of days in the relevant Interest Period and
be payable in arrears on the Interest Payment Date immediately following the
end of that Interest Period.

 

(c)                                  The
Interest Rate for any Interest Period shall be the rate which is the sum of:

 

(i)                                     the
Relevant Spread; and

 

(ii)                                  LIBOR
on the Interest Determination Date for that Interest Period for six (6) months
(or, in the case of any Loan that is made on a date other than an Interest
Payment Date, for one (1) month, two (2) months, three (3) months
or six (6) months, whichever period is closest to the duration of the
relevant Interest Period (or, if two periods are equally close, 

 

6

 

the longer one)) rounded
upward to the nearest three decimal places.

 

(d)                                 If,
for any Interest Period, IFC cannot determine LIBOR by reference to the Reuters
Service or any other service that displays BBA rates, IFC shall notify the
relevant Borrower and shall instead determine LIBOR:

 

(i)                                     on
the second Business Day before the beginning of the relevant Interest Period by
calculating the arithmetic mean (rounded upward to the nearest three decimal
places) of the offered rates advised to IFC on or around 11:00 a.m.,
London time, for deposits in Dollars and otherwise in accordance with Section 2.03
(c) (ii), by any four (4) major banks active in Dollars in the London
interbank market, selected by IFC; provided that if less than four quotations
are received, IFC may rely on the quotations so received if not less than two
(2); or

 

(ii)                                  if
less than two (2) quotations are received from the banks in London in
accordance with subsection (i) above, on the first day of the relevant
Interest Period, by calculating the arithmetic mean (rounded upward to the
nearest three decimal places) of the offered rates advised to IFC on or around
11:00 a.m., New York time, for loans in Dollars and otherwise in
accordance with Section 2.03 (c) (ii), by a major bank or banks in
New York, New York selected by IFC.

 

(e)                                  On
each Interest Determination Date for any Interest Period, IFC shall determine
the Interest Rate applicable to that Interest Period and promptly notify the
Borrowers of those rates.

 

(f)                                    The
determination by IFC, from time to time, of the applicable Interest Rate shall
be final and conclusive and bind the Borrowers (unless the Borrowers show to
IFC’s satisfaction that the determination involves manifest error).

 

Section 2.04.                             Default Rate
Interest.  (a) Without
limiting the remedies available to IFC under this Agreement or otherwise (and
to the maximum extent permitted by applicable law), if any Borrower fails to
make any payment of principal or interest (including interest payable pursuant
to this Section) or any other payment provided for in Section 2.07 (Fees) when due as specified in this Agreement (whether at
stated maturity or upon acceleration), the Borrowers shall pay interest on the
amount of that payment due and unpaid at the rate which shall be the sum of two
per cent (2%) per annum and the Interest Rate in effect from time to time.

 

7

 

(b)                                 Interest
at the rate referred to in Section 2.04 (a) shall accrue from the
date on which payment of the relevant overdue amount became due until the date
of actual payment of that amount (as well after as before judgment), and shall
be payable on demand or, if not demanded, on each Interest Payment Date falling
after any such overdue amount became due.

 

Section 2.05.                             Repayment.  (a) Subject
to Section 1.03 (Business Day Adjustment)
and Section 2.02(e) (Disbusement Procedure),
the Borrowers shall repay each Loan in full on the Interest Payment Date
immediately following the date of Disbursement of such Loan.

 

(b)                                 Subject
to the terms of this Agreement and the Common Terms Agreement, the principal
amount of any Loan repaid under this Agreement may be re-borrowed.

 

Section 2.06.                             Prepayment.  Without prejudice to
Section 2.16 (Illegality of
Participation):

 

(a)                                  subject
to the requirements of Section 3.8 (General Prepayment Terms)
of the Common Terms Agreement, the Borrower may prepay on any Interest Payment
Date all or any part of any Loan, on not less than fifteen (15) days prior
notice to IFC, but only if:

 

(i)                                     the
Borrower simultaneously pays all accrued interest and Increased Costs (if any)
on the amount of the Loans to be prepaid, together with all other amounts then
due and payable under this Agreement, including the amount payable under Section 2.11
(Unwinding Costs), if the prepayment is
not made on an Interest Payment Date;

 

(ii)                                  for
a partial prepayment, that prepayment is an amount not less than three hundred
seventy-five thousand Dollars ($375,000); and

 

(iii)                               if
requested by IFC, the Borrowers deliver to IFC, prior to the date of
prepayment, evidence reasonably satisfactory to IFC that all necessary
Authorizations with respect to the prepayment have been obtained.

 

(b)                                 The
Borrowers shall make the prepayment in accordance with the terms of any notice
delivered in accordance with Section 2.06(a).

 

(c)                                  The
Borrowers shall also make the prepayments required under Section 3 (Loans) of the Common Terms Agreement.

 

8

 

Section 2.07.                             Fees.  (a) The
Borrowers shall pay to IFC a commitment fee:

 

(i)                                     at
the rate of one per cent (1%) per annum on an amount equal to that part of the
Maximum Available Amount of the IFC Facility that from time to time has not
been disbursed or canceled, beginning to accrue on the date of this Agreement;

 

(ii)                                  at
the rate of ten percent (10%) of the Relevant Spread per annum on an amount
equal to (x) the Maximum Facility Amount less (y) the Maximum
Available Amount from time to time of the IFC Facility, beginning to accrue on
the date of this Agreement;

 

(iii)                               pro
rated on the basis of a 360-day year for the actual number of days
elapsed; and

 

(iv)                              payable
semi-annually, in arrears, on each Interest Payment Date, the first such
payment to be due on December 31, 2008.

 

(b)                                 The
Borrowers shall also pay to IFC:

 

(i)                                     a
front-end fee of one and one-half percent (11⁄2%) of the amount of the IFC
Facility, to be paid on the earlier of (x) the date which is thirty (30)
days after the date of this Agreement and (y) the date immediately
preceding the date of the first Disbursement;

 

(ii)                                  the
fees set forth in the IFC Fee Letter; and

 

(iii)                               if
the Borrowers and IFC agree to restructure all or part of the Loans, the
Borrowers and IFC shall negotiate in good faith an appropriate amount to
compensate IFC for the additional work of IFC staff required in connection with
such restructuring.

 

9

 

Section 2.08.                             Currency and Place
of Payments. 
(a) The Borrowers shall make all payments of principal, interest,
fees, and any other amount due to IFC under this Agreement in Dollars, in same
day funds, to the account of IFC at Citibank N.A., 111 Wall Street, New York,
New York, U.S.A., ABA #021000089, for credit to
IFC’s account number 36085579, or at such other bank or account as IFC from
time to time designates, quoting Investment No. 24346.  Payments must be received in IFC’s designated
account no later than 1:00 p.m. New York time.

 

(b)                                 The
tender or payment of any amount payable under this Agreement (whether or not by
recovery under a judgment) in any currency other than Dollars shall not novate,
discharge or satisfy the obligation of the Borrowers to pay in Dollars all
amounts payable under this Agreement except to the extent that (and as of the
date when) IFC actually receives funds in Dollars in the account specified in,
or pursuant to, Section 2.08 (a).

 

(c)                                  The
Borrowers shall indemnify IFC against any losses resulting from a payment being
received or an order or judgment being given under this Agreement in any
currency other than Dollars or any place other than the account specified in,
or pursuant to, Section 2.08 (a). The Borrowers shall, as a separate
obligation, pay such additional amount as is necessary to enable IFC to
receive, after conversion to Dollars at a market rate and transfer to that
account, the full amount due to IFC under this Agreement in Dollars and in the
account specified in, or pursuant to, Section 2.08 (a).

 

(d)                                 Notwithstanding
the provisions of Section 2.08 (a) and Section 2.08 (b), IFC may
require the Borrowers to pay (or reimburse IFC) for any Taxes, fees, costs,
expenses and other amounts payable under Section 2.14 (a) (Taxes) and Section 2.15 (Expenses)
in the currency in which they are payable, if other than Dollars.

 

Section 2.09.                             Allocation of
Partial Payments.  If at any time IFC receives less than the
full amount then due and payable to it under this Agreement, IFC may allocate
and apply the amount received in any way or manner and for such purpose or
purposes under this Agreement as IFC in its sole discretion determines,
notwithstanding any instruction that the Borrowers may give to the contrary.

 

Section 2.10.                             Increased Costs.  On each Interest Payment Date, the Borrowers
shall pay, in addition to principal and interest, the amount which IFC from
time to time notifies to the Borrowers in an Increased Costs Certificate as
being the aggregate Increased Costs accrued and unpaid prior to that Interest
Payment Date.

 

Section 2.11.                             Unwinding Costs.  (a) If IFC incurs any cost, expense or
loss (other than loss of the Relevant Spread) as a result of the Borrowers:

 

10

 

(i)                                     failing
to borrow in accordance with a request for Disbursement made pursuant to Section 2.02
(Disbursement Procedure);

 

(ii)                                  failing
to prepay in accordance with a notice of prepayment;

 

(iii)                               prepaying
all or any portion of the Loans; or

 

(iv)                              after
acceleration of the Loans, paying all or a portion of the Loans on a date other
than an Interest Payment Date;

 

then the Borrowers shall
promptly pay to IFC the amount that IFC from time to time notifies to the
Borrowers as being the amount of those costs, expenses and losses incurred.

 

(b)                                 For
the purposes of this Section, “costs, expenses or losses” include any premium,
penalty or expense incurred to liquidate or obtain third party deposits,
borrowings, hedges or swaps in order to make, maintain, fund or hedge all or
any part of any Loan or prepayment of any Loan, or any payment of all or part
of the Loans upon acceleration.

 

Section 2.12.                             Suspension or
Cancellation by IFC.  (a) IFC may, by notice to the Borrowers,
suspend or cancel the right of the Borrowers to the undisbursed portion of the IFC
Facility in whole or in part:

 

(i)                                     if
the first Disbursement of a Loan has not been made by October 31, 2008, or
such other date as the parties agree;

 

(ii)                                  if
any Event of Default has occurred and is continuing or if the Event of Default
specified in Section 8.1(d) of the Common Terms Agreement is, in the
reasonable opinion of IFC, imminent; or

 

(iii)                               any
event or condition has occurred which has or can be reasonably expected to have
a Material Adverse Effect.

 

(b)                                 Upon
the giving of any such notice, the right of the Borrowers to any further
Disbursement of the undisbursed portion of the IFC Facility shall be suspended
or canceled, as the case may be.  The
exercise by IFC of its right of suspension shall not preclude IFC from
exercising its right of cancellation, either for the same or any other reason
specified in Section 2.12(a) and shall not limit any other provision
of this Agreement.  Upon any cancellation
the Borrowers shall, subject to paragraph (c) of this Section 2.12,
pay to IFC all fees and other amounts accrued (whether or not then due and
payable) under this Agreement up to the date of that cancellation.

 

11

 

(c)                                  In
the case of partial cancellation of the undisbursed portion of the IFC Facility
pursuant to paragraph (a) of this Section 2.12, or Section 2.13(a),
interest on the amount then outstanding of the Loans remains payable as
provided in Section 2.03 (Interest).

 

Section 2.13.                             Cancellation by
the Borrowers. 
(a) Subject to the requirements of Section 3.9 (Cancellation by the Borrowers) of the Common Terms
Agreement, the Borrowers may, by notice to IFC, irrevocably request IFC to
cancel, in whole or in part, the undisbursed portion of the IFC Facility on the
date specified in that notice (which shall be a date not earlier than fifteen
(15) days after the date of that notice); provided that the Borrowers may
request any such cancellation only once in any Financial Year.

 

(b)                                 IFC
shall, by notice to the Borrowers, cancel such undisbursed portion of the IFC
Facility effective as of that specified date if, subject to Section 2.12(c),
IFC has received all fees and other amounts accrued (whether or not then due
and payable) under this Agreement up to such specified date.

 

(c)                                  Any
portion of the Facility that is cancelled under this Section 2.13 may not
be reinstated or disbursed.

 

Section 2.14.                             Taxes.  (a) The Borrowers shall pay or cause to
be paid all Taxes (other than taxes, if any, payable on the overall income of
IFC)  on
or in connection with the payment of any and all amounts due under this
Agreement that are now or in the future levied or imposed by any Authority of
the Republic of Peru or by any organization of which the Republic of Peru is a
member or any jurisdiction through or out of which a payment is made.

 

(b)                                 All
payments of principal, interest, fees and other amounts due under this
Agreement shall be made without deduction for or on account of any Taxes.

 

(c)                                  If
the Borrowers are prevented by operation of law or otherwise from making or causing
to be made those payments without deduction, the principal or (as the case may
be) interest, fees or other amounts due under this Agreement shall be increased
to such amount as may be necessary so that IFC receives the full amount it
would have received (taking into account any Taxes payable on amounts payable
by the Borrowers under this subsection) had those payments been made without
that deduction.

 

(d)                                 If
Section 2.14 (c) applies and IFC so requests, the Borrowers shall
deliver to IFC official tax receipts evidencing payment (or certified copies of
them) within thirty (30) days of the date of that request.

 

Section 2.15.                             Expenses.  (a) The Borrowers shall pay or, as the
case may be, reimburse IFC or its assignees any amount paid by them on account
of, all 

 

12

 

taxes (including stamp taxes), duties, fees or other charges payable on
or in connection with the execution, issue, delivery, registration or
notarization of the Transaction Documents and any other documents related to
this Agreement or any other Transaction Document.

 

(b)                                 The
Borrowers shall pay to IFC or as IFC may direct:

 

(i)                                     the
fees and expenses set forth in Section 6.14 (Costs and
Expenses) of the Common Terms Agreement; and

 

(ii)                                  the
documented fees and expenses of IFC’s counsel, being White & Case LLP,
and Estudio Aurelio García Sayán Abogados, Peruvian counsel, incurred in
connection with:

 

(A)                              Project-related
due diligence conducted and the preparation of the investment by IFC provided
for under this Agreement and any other Transaction Document; and

 

(B)                                the
administration by IFC of the investment provided for in this Agreement.

 

Section 2.16.                             Illegality of
Participation. 
If IFC has sold a participation in the Loans and after the date of this
Agreement, any change made in any applicable law or regulation or official
directive (or its interpretation or application by any Authority charged with
its administration) (herein the “Relevant Change”) makes it unlawful for the
participant acquiring that participation to continue to maintain or to fund its
participation:

 

(a)                                  the
Borrowers shall, upon request by IFC (but subject to any applicable
Authorization having been obtained), on the earlier of (x) the next
Interest Payment Date and (y) the date that IFC advises the Borrowers is
the latest day permitted by the Relevant Change, prepay in full that part of
the Loans that IFC advises corresponds to that participation;

 

(b)                                 concurrently
with the prepayment of the part of the Loans corresponding to the participation
affected by the Relevant Change, the Borrowers shall pay all accrued interest,
Increased Costs (if any) on that part of the Loans (and, if that prepayment is
not made on an Interest Payment Date, any amount payable in respect of the prepayment
under Section 2.11 (Unwinding Costs));
and

 

(c)                                  the
Borrowers agree to take all reasonable steps to obtain, as quickly as possible
after receipt of IFC’s request for prepayment, the Authorization referred to in
Section 2.16 (a) if any such Authorization is then required.

 

13

 

Section 2.17.                             Mitigation.  If the Borrowers
become obligated to make payments or prepay Loans under Section 2.10 (Increased Costs) or 2.16 (Illegality
of Participation), IFC shall request the relevant participant to
take such steps (to the extent it can lawfully do so and without prejudice to
its own position) as are reasonably available to it with a view to mitigating
the circumstances giving rise to such payment obligations.

 

ARTICLE III

 

Conditions of Disbursement

 

Section 3.01.                             Conditions of
Disbursement.  (a)  The obligation of IFC to make any
Disbursement is subject to the fulfillment prior to or concurrently with the
making of such Disbursement of the conditions set forth in Section 4.1 (First Disbursement under each Facility), Section 4.2 (Special Conditions for First Disbursement under IFC Facility)
and Section 4.4 (All Disbursements under
the Facilities) of the Common Terms Agreement; and

 

(b)           the
obligation of IFC to make any Disbursement is further subject to the
fulfillment prior to or concurrently with the making of such Disbursement of
the condition that, upon the request of IFC, IFC shall have received a legal
opinion or opinions in form and substance satisfactory to IFC of Lenders’
counsel in Peru or in any other relevant jurisdiction with respect to matters
relating to any changes in applicable Law.

 

Section 3.02.                             Borrower’s
Certification. 
(a)  The Borrowers shall deliver to IFC with respect to each
request for Disbursement:

 

(i)                                     certifications,
in the form included in Schedule 1, relating to the conditions referred to in Section 3.01
(Conditions of Disbursement) expressed to be effective as of the date of that
Disbursement, and in the case of Section 4.2 (j)(i) of the Common
Terms Agreement, also certified by the Auditors if IFC so requires; and

 

(ii)                                  such
evidence as IFC may reasonably request of the proposed utilization of the
proceeds of that Disbursement or the utilization of the proceeds of any prior
Disbursement.

 

(b)                                 With
respect to Rollover Loans, the Borrowers shall be deemed to have provided the
certifications set forth in Schedule 1 as of the Interest Payment Date upon
which such Rollover Loan is made.

 

14

 

Section 3.03.                             Conditions for
IFC Benefit. 
The conditions in Section 4 (Conditions Precedent)
of the Common Terms Agreement and in this Article III are for the benefit
of IFC and may be waived only by IFC in its sole discretion.

 

ARTICLE IV

Miscellaneous

 

Section 4.01.                             Saving of Rights.  (a) The
rights and remedies of IFC in relation to any misrepresentation or breach of
warranty on the part of the Borrowers shall not be prejudiced by any
investigation by or on behalf of IFC into the affairs of the Borrowers, by the
execution or the performance of this Agreement, or by any other act or thing
which may be done by or on behalf of IFC in connection with this Agreement and
which might, apart from this Section, prejudice such rights or remedies.

 

(b)                                 No
course of dealing or waiver by IFC in connection with any condition of
Disbursement of any Loan under this Agreement shall impair any right, power or
remedy of IFC with respect to any other condition of Disbursement, or be
construed to be a waiver thereof; nor shall the action of IFC with respect to
any Disbursement affect or impair any right, power or remedy of IFC with
respect to any other Disbursement.

 

(c)                                  Unless otherwise
notified to the Borrowers by IFC and without prejudice to the generality of Section 4.01(b),
the right of IFC to require compliance with any condition under this Agreement
that may be waived by IFC with respect to any Disbursement is expressly
preserved for the purposes of any subsequent Disbursement.

 

(d)                                 No course of
dealing and no failure or delay by IFC in exercising, in whole or in part, any
power, remedy, discretion, authority or other right under this Agreement or any
other agreement shall waive or impair, or be construed to be a waiver of, such
or any other power, remedy, discretion, authority or right under this
Agreement, or in any manner preclude its additional or future exercise; nor
shall the action of IFC with respect to any default, or any acquiescence by it
therein, affect or impair any right, power or remedy of IFC with respect to any
other default.

 

Section 4.02.                             Notices.  Any notice, request or other communication to
be given or made under this Agreement shall be in writing.  Subject to Sections 6.17(j) and (k) (Furnishing of Information by the Borrower) of the Common
Terms Agreement and Section 9.7 (Jurisdiction and
Enforcement) of the Common Terms Agreement, any such communication
may be delivered by hand, airmail, facsimile or established courier service to
the party’s address specified below or at such other address as such party
notifies to the other party from time to time, and will be effective upon
receipt.

 

15

 

For the Borrowers:

 

BPZ
Exploración & Producción S.R.L.

BPZ Marine
Peru S.R.L.

Attention:  General Manager

Manual
de Falla #297

San
Borja, Lima

Peru

 

Facsimile:  (011-511) 225-3289

 

and

 

BPZ
Resources Inc.

Attention:  Chief Financial Officer or General Counsel

Two
Westlake

580
Westlake Park Blvd., Suite 525

Houston,
Texas 77079

 

Facsimile:
(281) 556-6377

 

For IFC:

 

International Finance
Corporation

2121 Pennsylvania Avenue,
N.W.

United States of America

 

Attention:                                         Director, Oil, Gas, Mining and Chemicals Department

 

Facsimile:                                            (202) 974-4768

 

With a
copy (in the case of communications relating to payments) sent to the attention
of the Director, Department of Financial Operations, at:

 

Facsimile:                                            (202) 522-7419.

 

16

 

Section 4.03.                             English Language.  (a) All documents to be provided or
communications to be given or made under this Agreement shall be in the English
language.

 

(b)                                 To
the extent that the original version of any document to be provided, or
communication to be given or made, to IFC under this Agreement or any other
Transaction Document is in a language other than English, that document or
communication shall be accompanied by an English translation certified by an
Authorized Representative to be a true and correct translation of the
original.  IFC may, if it so requires,
obtain an English translation of any document or communication received in a
language other than English at the cost and expense of the Borrowers.  IFC may deem any such English translation to
be the governing version between the Borrowers and IFC.

 

Section 4.04.                             Term of
Agreement. 
This Agreement shall continue in force until all monies payable under it
have been fully paid in accordance with its provisions.

 

Section 4.05.                             Disclosure of
Information. 
(a) IFC may disclose any documents or records of, or information
about, this Agreement or any other Transaction Document, or the assets,
business or affairs of the Borrowers to:

 

(i)                                     its
outside counsel, auditors and rating agencies,

 

(ii)                                  any
Person who intends to purchase a participation in a portion of any Loan or any
participant in a Loan, and

 

(iii)                               any
other Person as IFC may deem appropriate in connection with any proposed sale,
transfer, assignment or other disposition of IFC’s rights under this Agreement
or any Transaction Document or otherwise for the purpose of exercising any
power, remedy, right, authority, or discretion relevant to this Agreement or
any other Transaction Document.

 

(b)                                 The
Borrowers acknowledge and agree that, notwithstanding the terms of any other
agreement between the Borrowers and IFC, a disclosure of information by IFC in
the circumstances contemplated by Section 4.05(a) does not violate
any duty owed to the Borrowers under this Agreement or under any such other
agreement.

 

Section 4.06.                             Successors and
Assignees. 
This Agreement binds and benefits the respective successors and
assignees of the parties.  However, the
Borrowers may not assign or delegate any of their rights or obligations under
this Agreement without the prior consent of IFC.  IFC may assign or delegate any of 

 

17

 

its rights and obligations under the other Finance Documents in
connection with any assignment or delegation of rights and obligations under
this Agreement.

 

Section 4.07.                             Amendments,
Waivers and Consents.  Any amendment or waiver of, or any consent
given under, any provision of this Agreement shall be in writing and, in the
case of an amendment, signed by the parties.

 

Section 4.08.                             Governing Law.  This Agreement is governed by, and shall be
construed in accordance with, the laws of the State of New York, United States
of America.

 

Section 4.09.                             Dispute
Resolution. 
The provisions of Sections 9.7 (Jurisdiction and Enforcement) and 9.8 (Privileges and Immunities) of the Common
Terms Agreement shall be applicable to this Agreement as if set forth in full
herein.

 

Section 4.10.                             Counterparts.  This Agreement may be executed in several
counterparts, each of which is an original, but all of which together
constitute one and the same agreement.

 

18

 

IN WITNESS WHEREOF, the
parties have caused this Agreement to be signed in their respective names as of
the date first above written.

 

 

	
   

  	
  BPZ EXPLORACIÓN & PRODUCCIÓN
  S.R.L.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
   

  	
   

  	
  Name:

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BPZ MARINE PERU S.R.L.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
   

  	
   

  	
  Name:

  	
  Manuel Pablo Zúñiga-Pflücker

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  

 

 

	
   

  	
  INTERNATIONAL FINANCE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  William Bullmer

  
	
   

  	
   

  	
  Name:

  	
  William Bullmer

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  

 

 

SCHEDULE 1

 

FORM OF REQUEST FOR
DISBURSEMENT

 

(See Section 2.02
and Section 3.03 of the Loan Agreement)

 

[BPZ
Exploración/BPZ Marine’s Letterhead]

 

[Date]

 

International Finance
Corporation

2121 Pennsylvania Avenue,
N.W.

Washington, D.C. 20433

United States of America

Attention:                                         Director,
Oil, Gas, Mining and Chemicals Department

 

Ladies and Gentlemen:

 

Investment No. 24346

Request for Loan Disbursement No. [·]*

 

1.                                       Please
refer to the Loan Agreement (the “Loan Agreement”)
dated as of August 15, 2008, between BPZ Exploración & Producción
S.R.L. (“BPZ Exploración”), BPZ Marine Peru
S.R.L. (“BPZ Marine”) and International Finance
Corporation (“IFC”) and the Common Terms
Agreement referred to therein. Terms defined in the Loan Agreement have their
defined meanings whenever used in this request.

 

2.                                       [BPZ
Exploración/ BPZ Marine] irrevocably requests the disbursement on                         ,
         (or as soon as
practicable thereafter) of the amount of                         
(                        )
under the IFC Facility (the “Disbursement”)
in accordance with the provisions of Section 2.02 of the Loan Agreement.
You are requested to pay such amount to the account in [New York] of [BPZ
Exploración & Producción S.R.L./BPZ Marine Peru S.R.L.] [Name of
correspondent Bank], Account No.                         
at [Name and Address of Bank] [for further credit to Account No.                         
at [Name and address of Security Trustee] in Lima, Peru.

 

3.                                       For
the purpose of Article III of the Loan Agreement, the Borrower certifies
as follows:

 

(a)                                  no
Event of Default and no Potential Event of Default has occurred and is
continuing;

 

*                                         Each
to be numbered in series.

 

1

 

SCHEDULE 1

 

(b)                                 the
proceeds of the Disbursement are at the date of this request needed by the
Borrowers for the purpose of (i) the Project, or will be needed for such
purpose within three (3) months of such date, (ii) the Permitted
Nueva Esperanza Credit Support or (iii) establishing cash collateral in
full for BPZ Exploración’s obligations secured under the Import Duty Contract
pursuant to Section 6.1(b) (Use of Proceeds)
of the Common Terms Agreement;

 

(c)                                  since
the date of the Loan Agreement nothing has occurred which has or could
reasonably be expected to have a Material Adverse Effect;

 

(d)                                 the
representations and warranties made in Section 5 of the Common Terms
Agreement (other than in Sections 5.1(f) and 5.1(h)) are true on the date
of this request and will be true on the date of Disbursement with the same
effect as if such representations and warranties had been made on and as of
each such date, except that in the event any such representation or warranty
has been expressly made only as of an earlier date, such representation and
warranty is true and correct in all material respects as of such earlier date;

 

(e)                                  the
proceeds of the Disbursement are not in reimbursement of, or to be used for,
expenditures in the territories of any country that is not a member of the
World Bank or for goods produced in or services supplied from any such country;
and

 

(f)                                    no
Lender has suspended or cancelled its commitment to make Loans in accordance
with the terms of its Facility Agreement to the extent permitted to do so
pursuant to the express terms thereof.

 

The above certifications
are effective as of the date of this Request for Disbursement and shall
continue to be effective as of the date of the Disbursement.  If any of these certifications is no longer
valid as of or prior to the date of the requested Disbursement, the Borrower
undertakes to immediately notify IFC.

 

	
   

  	
  Yours truly,

  
	
   

  	
   

  
	
   

  	
  BPZ EXPLORACIÓN & PRODUCCIÓN 

  S.R.L./BPZ MARINE PERU S.R.L.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Representative

  

 

	
  Copy to:

  	
  Director, Department of Financial Operations International Finance
  Corporation

  

 

2

 

SCHEDULE 2

 

FORM OF DISBURSEMENT
RECEIPT

 

(See Section 2.02
of the Loan Agreement)

 

[Borrower’s
Letterhead]

 

International Finance
Corporation

2121 Pennsylvania Avenue,
N.W.

Washington, D.C. 20433

United States of America

Attention:                                         Director,
Department of Financial Operations

 

Ladies and Gentlemen:

 

Investment No. 24346

 

Disbursement
Receipt No. [·]*

 

We, [BPZ Exploración &
Producción S.R.L./BPZ Marine Peru S.R.L.]  hereby acknowledge receipt on the
date hereof, of the sum of                       
(      ) disbursed to us by International
Finance Corporation (“IFC”) under the
IFC Facility of fifteen million Dollars (US$15,000,000) provided for in the
Loan Agreement dated as of August 15, 2008 between our company and IFC.

 

	
   

  	
  Yours truly,

  
	
   

  	
   

  
	
   

  	
  BPZ EXPLORACIÓN & PRODUCCIÓN 

  S.R.L./BPZ MARINE PERU S.R.L.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Representative**

  

 

*                                         To
correspond with number of the Disbursement request.  See Schedule 1.

**                                  As
named in the Borrower’s Certificate of Incumbency and Authority.

 

1EXHIBIT 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

 

 

TABLE
OF 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

 

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

 

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

 

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

 

(3)                                 INTERNATIONAL
FINANCE CORPORATION, an international organization established by
Articles of Agreement among its member countries including Peru (“IFC”); and

 

(4)                                 THE
ADDITIONAL SECURED FACILITY LENDERS,  upon execution
of 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, events
of default, principles of construction, rules of interpretation and its
jurisdiction, governing law and notice provisions, is made a part of each of
(i) the IFC Loan Agreement, and (ii) upon execution of an Accession
Agreement, the Additional Secured Facility Agreement.

 

(b)                                 Subject to paragraph (c) below of this
Section 1.1:

 

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

 

(ii)                                  this Agreement and the Additional Secured
Facility Agreement shall be read and construed together as one agreement.

 

(c)                                  If any provision of this Agreement conflicts
with any provision of any Loan Agreement, then the provisions of the relevant
Facility Agreement shall prevail.

 

1.2                                 Definitions

 

Wherever used in this Agreement (including
its Schedules and Exhibits), unless the context otherwise requires, the
following 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

 

	
  “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

 

	
  “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

 

	
  “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

 

	
  “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

 

	
   

  	
  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

 

	
  “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

 

	
  “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

 

	
   

  	
  (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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
  “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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
   

  	
  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

 

	
   

  	
   

  	
  (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

 

	
   

  	
   

  	
  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

 

	
  “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

 

	
  “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, words
denoting 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 specified
Article or Section of, or Schedule or Exhibit to, this
Agreement;

 

(c)                                  a reference to an agreement shall be
construed as a reference to such agreement as it may be amended, varied,
supplemented, novated or assigned from time to time but disregarding any
amendment, variation, supplement, novation or assignment made in breach of this
Agreement;

 

23

 

(d)                                 a reference to any party to any document
includes that party’s successors and permitted assigns;

 

(e)                                  the headings and the Table of Contents are
inserted for convenience of reference only and shall not affect the
interpretation of this Agreement;

 

(f)                                    “include”, “includes” and “including” shall
be respectively construed as “include without limitation”, “includes without
limitation” and “including without limitation”, and all derivative terms shall
be construed accordingly;

 

(g)                                 when an Interest Payment Date (or other date
for 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.                                      THE
PROJECT

 

2.1                                 The Project

 

The project consists of the ongoing development and
operation of the Corvina Field in Block Z-1 and additional Petroleum Assets
(the “Project”), including related capital
expenditures, working capital requirements and debt repayment requirements
relating thereto.  In addition, although
the 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 affiliated
company, Nueva Esperanza, in an amount not exceeding US$90,000,000, with the
initial payment of interest to be deferred until January 1, 2009 and
otherwise on Approved Terms and Conditions, pursuant to documentation
reasonably satisfactory to the Facility Agents (“Permitted
Nueva Esperanza Credit Support”).

 

2.2                                 Facilities

 

(a)                                  Subject to the terms and conditions of this
Agreement and the Facility Agreements:

 

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

 

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

 

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

 

24

 

(c)                                  No Finance Party is bound to monitor or
verify the application of any amount borrowed pursuant to the Finance
Documents.

 

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

 

2.3                                 Borrowers’
Obligations Joint and Several

 

The Borrowers’ obligations under the Finance Documents
are joint and several.

 

3.                                      LOANS

 

3.1                                 Disbursements

 

(a)                                  Subject to Section 4 (Conditions Precedent) and paragraph (b) below of this
Section 3.1, the Loans shall be disbursed by each of the Lenders in
accordance with, and subject to, the Facility Agreement under which any such
Loan is disbursed; provided that
in no event shall the Borrowers at any time request Disbursements of Loans in
an aggregate amount exceeding the Maximum Available Amount.

 

(b)                                 No Lender shall be responsible to the Borrowers
for any failure by any other Lender to make a Disbursement.

 

3.2                                 Repayment

 

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

 

3.3                                 Rollover Loans

 

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

 

25

 

3.4                                 Reduction

 

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

 

3.5                                 Mandatory Prepayments for Illegality; Insurance Events

 

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

 

(a)                                  in accordance with the relevant Facility
Agreement if it becomes unlawful for a Lender (or a participant in a Loan) to
continue to maintain or fund any Loan (or participation therein); and

 

(b)                                 in accordance with
Section 6.11(c) (Insurance),

 

in each case, whereupon all undisbursed portions of
such Facility or Facilities (as the case may be) shall be immediately
cancelled.

 

3.6                                 Mandatory Prepayments to Achieve Minimum Levels

 

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

 

3.7                                 Voluntary
Prepayments

 

The Borrowers shall have the right to voluntarily
prepay all or part of the principal amount of any Loan then outstanding in
accordance with, and subject to, the terms of the Facility Agreement under
which such Loan was made.

 

3.8                                 General
Prepayment 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 (Mandatory
Prepayments to Achieve Minimum Levels) and Section 3.7 (Voluntary Prepayments)) with respect to
any Facility shall be made together with payment of (i) any premium
required under the Facility Agreement for such Facility, (ii) all accrued
interest on the principal amount of the Loans to be prepaid, and (iii) all
costs and expenses, losses and all other amounts then due and payable under
this Agreement and the relevant Facility Agreement.

 

26

 

(b)                                 Any amounts of the Loans with respect to any
Facility mandatorily prepaid by the Borrowers (including pursuant to
Section 3.4 (Reduction), Section 3.5 (Mandatory Prepayments for Illegality; Insurance Events) or
Section 3.6 (Mandatory Prepayments to Achieve Minimum
Levels) other than with respect to Interest Cover) may not be
reborrowed.

 

(c)                                  In the event the Borrowers make a voluntary
prepayment of any Loans under a Facility (including pursuant to
Section 3.7 (Voluntary Prepayments)), the
Borrowers shall, at the same time, make a corresponding prepayment under each
other Facility, so that the same proportion of the Loans under each Facility is
prepaid, unless such corresponding prepayment is waived in accordance with the
terms of the Facility Agreement for such other Facility.

 

3.9                                 Cancellation
by Borrowers

 

(a)                                  The Borrowers shall have the right to cancel
all or part of any undisbursed portion of each Facility in accordance with, and
subject to, the terms of the Facility Agreement relating to such Facility.

 

(b)                                 To the extent the Borrowers cancel all or
part of any undisbursed portion of any Facility, the Borrowers shall, at the
same time, make a corresponding cancellation of all or part (as the case may
be) of the undisbursed portion of each other Facility, so that the same
proportion of the undisbursed portion of each Facility is cancelled, unless
such corresponding cancellation is waived in accordance with the terms of the
Facility Agreement for any such other Facility.

 

(c)                                  If the Borrowers cancel the undisbursed
portion of any Facility in part, the cancelled portion of such Facility shall
be allocated to reduce the Maximum Facility Amount of such Facility pro  rata across the
periods set forth in Schedule 1.

 

4.                                      CONDITIONS PRECEDENT

 

4.1                                 First
Disbursement under each Facility

 

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

 

27

 

(a)                                  Finance
Documents

 

(i)                                     The relevant Facility Agent shall have
received originals of each of the Finance Documents, duly executed by each
Person expressed to be party thereto.

 

(ii)                                  Each of the Finance Documents shall have
become (and remain as at the date proposed as the date of first Disbursement
under such Facility) fully and unconditionally effective in accordance with its
respective terms.

 

(b)                                 Project
Documents

 

(i)                                     The relevant Facility Agent shall have
received originals or Certified Copies of each Project Document, duly executed
by each Person expressed to be party thereto.

 

(ii)                                  Each of the Project Documents shall have
become (and remain as at the date proposed as the date of first Disbursement
under such Facility) fully and unconditionally effective in accordance with its
respective terms.

 

(c)                                  Security

 

The Security shall have been:

 

(i)  validly created and perfected as first-ranking
Liens, and

 

(ii) the relevant Facility Agent shall have
received duly executed originals of each of the Security Documents, together
with any document, recording, filing, notification, registration, notarization
or other evidence required for the creation, validity, perfection or priority
of the Liens as first-ranking Liens in favor of the Lenders in or under such
Security Documents;

 

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

 

(d)                                 Charters

 

The relevant
Facility Agent shall have received a true, complete and up to date Certified
Copy of the Charter of each Borrower.

 

28

 

(e)                                  Participation
Registers

 

The relevant Facility Agent shall have
received a Certified Copy of the registration entry in the public registry of
each Borrower showing all current holders of Participations of such Borrower
and the respective ownership interest in such Borrower.

 

(f)                                    Corporate
Authorizations

 

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

 

(g)                                 Certificate of
Incumbency and Authority

 

The relevant Facility Agent shall have
received a Certificate of Incumbency and Authority of each Borrower.

 

(h)                                 Governmental
and Other Approvals

 

The Borrowers have provided to the relevant
Facility Agent, Certified Copies of all Authorizations listed in Section 1
(Authorizations Already Obtained) and
Section 2 (Authorizations to be Obtained Prior to First
Disbursement) of Schedule 3 (Authorizations),
together with all other Authorizations not listed in those Sections that may
become necessary for (i) each
Loan (including the borrowing by the Borrowers under this Agreement and the
Facility Agreements); (ii) the business of the Borrowers as presently
carried on and as contemplated to be carried on; (iii) the Project;
(iv) the due execution, delivery, validity and enforceability of, and
performance by each Borrower of its obligations under this Agreement and each
other Transaction Document to which it is a party, and any other documents
necessary or desirable to the implementation of any of those agreements or
documents; and (v) the remittance to any Finance Party (or its assigns) of
all monies payable or owing to such Finance Party (or its assigns) under any
Finance Document in the currencies specified in such Finance Document; and all
those Authorizations are in full force and effect.

 

(i)                                     Insurance

 

The relevant Facility Agent shall have received:

 

(i)                                     copies of all insurance policies with respect
to the Insurances, including the Insurances required to be obtained pursuant to
Section 6.12 (Insurance) and
Schedule 4 (Insurance) and a certification of the
relevant insurers or insurance agents confirming that those policies are in
full force 

 

29

 

and effect and all premiums then due and payable
under those policies have been paid; and

 

(ii)                                  an insurance report from the Insurance
Advisor confirming the adequacy of the Insurances for the Project and for the Borrowers’
business.

 

(j)                                     Accounting
Systems and Auditors

 

The relevant Facility Agent shall have
received:

 

(i)                                     from the chief financial officer of each
Borrower (which shall be an Authorized Representative) a certificate certifying
that, as at a date not earlier than sixty (60) days prior to the date of first
Disbursement under such Facility, such Borrower is in compliance with the
provisions of Section 6.5(a) (Accounting);

 

(ii)                                  evidence in writing that the Auditors have
been appointed and that such appointment remains in full force and effect; and

 

(iii)                               a Certified Copy of a letter to the Auditors
from the Borrowers substantially in the form of Exhibit C (Form of Letter to Auditors), such letter not to have
been rescinded.

 

(k)                                  Legal Opinions

 

The relevant Facility Agent shall have received the following legal opinions, duly executed and
issued, regarding inter alia, due authorization,
execution and delivery of the Finance Documents and the Block Z-1 License by
each Borrower and any other Person which is party to any such document (other
than a Finance Party) and the enforceability of each Finance Document and the
Block Z-1 License, together with such other matters incidental to the
transactions 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 Sayán
Abogados, 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, special
New York counsel to the Lenders; and

 

(v)                                 such other opinions relating to the
Transaction Documents and the transactions contemplated thereby as the relevant Facility
Agent may reasonably request.

 

30

 

(l)                                     Financial Statements

 

The relevant Facility Agent shall have received:

 

(i)                                     Certified Copies of the annual
audited Financial Statements of each Borrower and BPZ
Resources for its
most recent Financial Year; and

 

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

 

in each case, prepared in accordance with the
Accounting Standards.

 

(m)                               Project Accounts

 

The Security Trustee shall have confirmed in writing
to the relevant Facility Agent that the Revenue Account required to be
maintained at the Security Trustee pursuant to the Finance Documents has been
opened.

 

(n)                                 Financial Model

 

The relevant Facility Agent
shall have received the Financial Model, the Base Case Assumptions and the
Base 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) then
due and payable to the Finance Parties under any Finance Document (including,
for the avoidance of doubt, any Fee Letter), and such payments shall not have
been rescinded.

 

(ii)                                  Without limiting paragraph (i) above, the Finance Parties shall
have been reimbursed (in full) for all invoiced fees and expenses of their
counsel in accordance with Section 6.15 (Costs and
Expenses) or confirmation by that counsel that the Borrowers have
directly paid those fees and expenses.

 

(p)                                 Appointment of Agent

 

The Borrowers
shall have delivered to the relevant Facility Agent evidence, substantially in
the form of Exhibit D (Form of Appointment
of Service of Process Letter), of appointment of an agent for
service of process pursuant to Section 9.7(e) (Jurisdiction
and Enforcement).

 

(q)                                 Environmental Matters

 

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

 

31

 

implementing the S&E Management System diligently
and in accordance with the timetable described in the Action Plan and in a
manner consistent with the Performance Standards.

 

(r)                                    Conditions in Facility Agreements

 

All conditions precedent to first Disbursement in the
relevant Facility Agreement (except for the conditions precedent set forth in
this Agreement which are incorporated into such Facility Agreement) have been
fulfilled (or else waived by the relevant person in whole or in part) in
accordance 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 Disbursement
under 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 in
part by IFC, of the following additional conditions precedent:

 

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

 

(b)                                 IFC shall have received from Bureau Veritas an independent risk
assessment satisfactory to IFC covering the FPSO production chain from wellhead
to refinery (the “Bureau Veritas Risk
Assessment”).

 

(c)                                  IFC shall have received (i) a copy of a Reserve Certification
dated no later than seven months prior to such first Disbursement and (ii) reasonably
satisfactory evidence of implementation of a plan to avoid flaring of gas
associated with oil production.

 

(d)                                 IFC shall have received evidence that: (i) whether pursuant to
an amendment to the Import Duty Contract or otherwise, upon application of the
proceeds of the first Disbursement of the IFC Loans to establish cash
collateral in full for the  obligations
secured under the Import Duty Contract, all revenues of the Borrowers shall be
paid to the Flow Trust, whether or not the Import Duty Contract is terminated, (ii) irrevocable
instructions have been issued and delivered by the Borrowers to the bank
receiving the proceeds of the first Disbursement of the IFC Loans (or by La
Fiduciaria S.A. if such first Disbursement is made to an account under the
Import Duty Contract) that such proceeds shall be applied to establish cash
collateral in full for the obligations secured under the Import Duty Contract
and (iii) the Borrowers have made arrangements to instruct Petroperu to
pay all amounts payable to the Borrowers to the Flow Trust upon the application
of the proceeds of the first Disbursement of the IFC Loans in accordance with
clause (ii) above.

 

32

 

(e)                                  IFC shall have received the report, reasonably satisfactory to IFC,
on the Supe accident, including lessons learned therefrom and follow-up actions
defined 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 Secured
Facility

 

The obligation of the Additional Secured Facility
Lenders to make the first Disbursement under the Additional Secured Facility
shall be subject to the prior fulfillment (in each case, in form and substance
satisfactory to the Facility Agent for the Additional Secured Facility), or the
prior waiver in whole or in part by such Facility Agent, of the following
additional conditions precedent:

 

(a)                                  The Facility Agent for the Additional Secured Facility shall have
received evidence that (i) the Borrowing Base Amount is equal to or
greater than the amount to be agreed with such Facility Agent and (ii) all
conditions in Section 4.2 have been fulfilled.

 

(b)                                 The Facility Agent for the Additional Secured Facility shall have
received (i) a copy of a Reserve Certification dated no later than seven
months prior to such first Disbursement and (ii) satisfactory evidence of
implementation of a plan to avoid flaring of gas associated with oil
production.

 

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

 

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

 

(e)                                  The Facility Agent for the Additional Secured Facility shall have
received evidence that (i) commercial production has commenced in the
Corvina Field under the Block Z-1 License, and (ii) BPZ Exploración has
retained its exploration rights under the Block Z-1 License with respect to all
other Petroleum Assets in Block Z-1.

 

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

 

(g)                                 The Facility Agent for the Additional Secured Facility shall have
received an audit report, in form and substance satisfactory to the Facility
Agent, prepared by Ernst and Young, certifying the fiscal and accounting
assumptions utilized in the Financial Model and the internal consistency of the
Financial Model.

 

33

 

(h)                                 The Facility Agent for the Additional Secured Facility shall have
received evidence that all revenues of the Borrowers are being paid to the Flow
Trust and that any amendment to or termination of the Import Duty Contract has
been  recorded in the Movable Registry of
Contracts (Registro Mobiliario de Contratos) in
Peru.

 

4.4                                 All Disbursements under the Facilities

 

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

 

(a)                                  Disbursement Application

 

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

 

(b)                                 Continuing Validity of Documents

 

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

 

(c)                                  Representations and Warranties

 

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

 

(d)                                 No Default

 

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

 

34

 

(e)                                  No Material Adverse Effect

 

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

 

(f)                                    Use of Proceeds

 

(i)                                     The proceeds of the Disbursement are, at the date of the Disbursement
Application with respect to such Disbursement, needed by the Borrowers for the
purpose of (x) the Project, or will be needed for such purpose within
three (3) months of such date, (y) Permitted Nueva Esperanza Credit
Support or (z) with respect to the first Disbursement of the IFC Loans,
establishing cash collateral in full for BPZ Exploración’s obligations secured
under the Import Duty Contract.

 

(ii)                                  With respect to any Disbursement under the IFC Facility, the
proceeds 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 the
World 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 its
commitment to make Loans under its Facility Agreement to the extent permitted
to do so pursuant to the express terms thereof.

 

(h)                                 Additional conditions under the Loan
Agreements

 

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

 

4.5                                 Conditions for Benefit of Each Lender / Independent Drawings

 

Notwithstanding anything to the contrary in this
Agreement 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 Disbursement
under a Facility by a Lender, the conditions of disbursement may only be waived
by such Lender or the relevant Facility Agent.

 

5.                                      REPRESENTATIONS AND WARRANTIES

 

5.1                                 Representations and Warranties

 

Each of the Borrowers  makes each of the following
representations and warranties as of the date of this Agreement, the date of
each Disbursement Application and the date of 

 

35

 

each Disbursement (including the Disbursement of a
Rollover Loan), all of which shall survive the execution and delivery of this
Agreement and the repayment of any Loan:

 

(a)                                  Organization and Authority

 

It is a limited liability company duly incorporated
and validly existing under the laws of Peru and has the corporate power, and
has obtained all required Authorizations, to own its assets, conduct its
business as presently conducted and to enter into, perform and comply with its
obligations under, the Transaction Documents to which it is a party and the
transactions 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 the
date of this Agreement, the authorized capital
of BPZ Exploración consists of $35,916,936, fully paid, divided in 122,100
Participations, each having a nominal value of $294.16, of which 122,100
validly exist and are outstanding, 67,155 of which are owned beneficially and
legally of record by BPZ Energy Inc. and 54,945 of which are owned beneficially
and legally of record by BPZ Energy International Holdings Limited Partnership.

 

(iii)                               As of the date of this Agreement, the authorized capital of BPZ
Marine consists of S/3,000, fully paid, divided in 3,000 Participations, each
having a nominal value of S/1.00 (One Nuevo Sol), of which 3,000 validly exist
and are outstanding, 1,650 of which are owned beneficially and legally of
record by BPZ Exploración and 1,350 of which are owned beneficially by BPZ
Energy International Holdings Limited Partnership and legally of record by
Jeannette 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 Permitted
Partner Subordinated Loans.

 

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

 

(c)                                  Validity

 

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

 

36

 

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

 

(d)                                 No Conflict

 

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

 

(i)                                     conflict with or result in a breach of any of the terms, conditions
or provisions of, or constitute a default (or an event which, with the giving
of notice, or the passage of time would constitute a default) or require any
consent under, any indenture, mortgage, agreement or other instrument or arrangement
to which such Borrower
is a party or by which such Borrower or any of its
assets is bound, except to the extent that any such conflict, breach or default
could not reasonably be expected to have a Material Adverse Effect;

 

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

 

(iii)                               violate in any material respect any of the terms or provisions of
such Borrower’s Charter or any Authorization, judgment, decree or order or any
statute, 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 routine
nature and are obtained in the ordinary course of business) needed by the
Borrowers on the date hereof to conduct their respective business, carry out
the Project and execute, and comply with its obligations under, this Agreement
and each of the other Transaction Documents to which it is a party;

 

(ii)                                  all Authorizations specified in Section 1 (Authorizations
Already Obtained) and, with respect to any Disbursement following
the first Disbursement, Section 2 (Authorizations to be
Obtained Prior to First Disbursement) of Schedule 3 (Authorizations) have been obtained and are in full force and
effect;

 

(iii)                               with respect to the first
Disbursement, 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 believe
that it will not obtain those Authorizations in a timely manner; and

 

37

 

(iv)                              except for rights that can reasonably be expected to be obtained on
commercially reasonable terms at the time required, the Project Documents
contain all rights that are necessary for:

 

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

 

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

 

(f)                                    No Amendments to Charter

 

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

 

(g)                                 No Immunity

 

Neither such Borrower nor any
of its properties enjoys any right of immunity from set-off, suit or execution
with respect of its assets or its obligations under any Transaction Document to
which 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 any
change that has or could reasonably be expected to have a Material Adverse
Effect or incurred any substantial loss or liability.

 

(i)                                     Financial Statements / Financial Model

 

(i)                                     The most recent Financial Statements of the Borrowers delivered
pursuant to this Agreement:

 

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

 

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

 

(C)                                disclose all material
liabilities (contingent or otherwise) of each Borrower, and the reserves, if
any, for such liabilities and all unrealised or material anticipated
liabilities and losses arising from commitments entered into by each Borrower
(whether or not such commitments have been disclosed in such financial
statements).

 

38

 

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

 

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

 

(j)                                     Material Agreements

 

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

 

(k)                                  Title to Assets

 

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

 

(l)                                     Security

 

At the time of each Disbursement:

 

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

 

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

 

39

 

Loans, (x) the applicable filings have been made
with the Movable Registry of Contracts (Registro Mobiliario de
Contratos) but registration of the Liens created under the
Participations Pledge and the Flow Trust may not be completed and (y) with
respect to the Flow Trust, the Borrowers’ revenues shall continue to be paid to
the trust established under the Import Duty Contract until the proceeds of the
first Disbursement of the IFC Loans have been applied in accordance with Section 4.4(f)(i)(z) and
Petroperu has been notified to commence payments to the Flow Trust in
accordance with Section 6.12.

 

(m)                               No Liens

 

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

 

(n)                                 Taxes

 

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

 

(ii)                                  There is no stamp or other Tax or charge of Peru or any political
subdivision or Taxing authority thereof, or of any Taxing authority, federation
or association of which Peru is a member, to be imposed on or by virtue of the
execution, delivery or performance of any Transaction Document to which it is a
party or necessary to ensure the legality, validity, enforceability or
admissibility in evidence thereof in Peru other than (i) withholding tax
in respect of interest paid to the Additional Secured Facility Lenders, (ii) amounts
that are required to be paid in connection with the registration of the
Security Documents with the competent authorities of Peru (which have been
paid), and (iii) other amounts to be paid, if any, in connection with
court or arbitral proceedings, procedures for arrest of or seizure and
foreclosure on property, and procedures for the enforcement of court or
arbitral decisions or awards.

 

(o)                                 Litigation

 

(i)                                     It is not engaged in nor, to the best of its knowledge, after due
inquiry, threatened by, any material litigation, arbitration or administrative
proceedings.

 

(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

 

(p)                                 Compliance with Laws

 

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

 

(q)                                 Environmental Matters

 

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

 

(ii)                                  It has not received nor is aware of either (A) any existing or
threatened complaint, order, directive, claim, citation or notice from any
Authority or (B) any material written communication from any Person
concerning the Project’s failure to comply with any matter covered by the
Performance Standards which failure has, or could reasonably be expected to
have, a Material Adverse Effect or a material adverse impact on the
implementation or operation of the Project in accordance with the Performance
Standards.

 

(r)                                    Sanctionable Practices

 

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

 

(s)                                  Labor Matters

 

There are no ongoing or, to its
best knowledge after due inquiry, threatened, strikes, slowdowns or work stoppages by
its employees or the employees of any contractor with respect to the Project, except
such strikes, slowdowns or work stoppages as could not reasonably be
expected to have a Material Adverse Effect.

 

(t)                                    Pari Passu Status

 

Its
obligations under the Finance Documents rank at least pari passu with the
claims of all its unsecured and unsubordinated creditors, except for
obligations mandatorily preferred by law applying to companies in Peru
generally.

 

(u)                                 Proprietary Rights

 

The Borrowers own, have
sufficient title to, or have the right to use (or can obtain the right to use
on reasonable commercial terms), all patents, trademarks, service marks, trade
names, copyrights, licenses, trade secrets or other proprietary rights
(collectively, “Proprietary Rights”) necessary to
their business as now conducted and as contemplated to be conducted without
infringing upon the rights 

 

41

 

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

 

(v)                                 Related Party Transactions

 

Except in respect of (a) Permitted
Partner Subordinated Loans, (b) the transactions contemplated with respect
to the agreement with BPZ Marine (Texas) for lease of a barge and (c) arm’s
length arrangements between the Borrowers and any Affiliate, the expense of
which is or will be included in Corporate G&A Adjustment, no existing
material written or oral agreement or instrument, including, without limitation,
trust instrument, indenture or evidence of indebtedness, lease, contract or
other obligation or commitment of either Borrower is with or for the direct
benefit of (i) any party (other than the other Borrower) owning, or
formerly owning, beneficially or of record, directly or indirectly, in excess
of five per cent (5%) of the outstanding capital stock of either Borrower, (ii) any
director, officer or similar representative of either Borrower, (iii) any
natural person related by blood, adoption or marriage to any party described in
(i) or (ii), or (iv) any entity in which any of the foregoing parties
has, directly or indirectly, at least a five per cent (5%) beneficial interest
(a “Related Party”).  Without limiting the generality of the
foregoing, no Related Party, directly or indirectly, owns or controls any
material assets or material properties which are used in the Borrowers’
business and to the actual knowledge of each Borrower, no Related Party,
directly or indirectly, engages in or has any significant interest in or
connection with any business which is, or has been within the last two (2) years,
a competitor, customer or supplier of either Borrower or has done business with
either Borrower or which currently sells or provides products or services which
are similar or related to the products or services sold or provided in
connection with the business of either Borrower.  For the avoidance of doubt, the foregoing
does not prevent a Permitted License Transfer.

 

(w)                               No Material Omissions

 

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

 

42

 

5.2                                 Acknowledgement and Warranty

 

Each Borrower acknowledges that
it has made the representations and warranties contained in Section 5.1 (Representations and Warranties) above with the intention of
inducing each of the Finance Parties to enter into the Finance Documents to
which they are a party and that each of the Finance Parties has entered such
documents on the basis of, and in full reliance on, each of such
representations and warranties.

 

6.                                      AFFIRMATIVE COVENANTS

 

6.1                                 Use of Proceeds

 

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

 

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

 

6.2                                 Corporate Existence; Conduct of Business

 

Each Borrower shall maintain
its corporate existence, comply with its Charter, and implement the Project and
conduct its business in all material respects with due diligence and
efficiency, in accordance with sound engineering, financial and business
practices.

 

6.3                                 Compliance with Laws

 

Each Borrower shall conduct its
business in compliance, in all material respects, with all applicable
requirements of Law.

 

6.4                                 Taxes

 

Each Borrower shall file by the
date due all returns, reports and filings in respect of Taxes required to be
filed by it and pay or withhold, when due, all Taxes due and payable by it or
required to be withheld by it, except such Taxes, if any, as are being contested
in good faith and by proper proceedings and as to which adequate reserves have
been 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, which
together adequately give a fair and true view of the financial condition of
such Borrower and the results of its operations in conformity with the
Accounting Standards.

 

43

 

(b)                                 appoint and maintain at all times a firm of internationally
recognized independent public accountants reasonably acceptable to the Facility
Agents 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) to
communicate directly with the Lenders at any time regarding the Borrowers
financial statements (both audited and unaudited), accounts and operations, and
provide to each of the Facility Agents a copy of that authorization.

 

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

 

6.6                                 Access

 

Upon a request by any Facility
Agent, and with five (5) Business Days prior notice to the relevant
Borrower, permit representatives of the Facility Agents and the CAO (including
any consultants), during normal office hours and subject to such Borrower’s
reasonable health and safety rules, environmental policies and prudent
operational requirements, to:

 

(a)                                  visit any of the sites and premises where the business of such
Borrower is conducted;

 

(b)                                 inspect any of such Borrower’s sites, facilities, plants and
equipment;

 

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

 

(d)                                 have access to those employees, agents, contractors and
subcontractors of such Borrower who have or may have knowledge of matters with
respect to which such Facility Agent seeks information;

 

at such Borrower’s reasonable
expense 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 such
prior notice shall be necessary if an Event of Default or Potential Event of
Default is continuing and (ii) in the case of the CAO, such access shall
be for the purpose of carrying out the CAO’s Role.

 

6.7                                 Environment, Social, Health and Safety

 

The Borrowers shall (through
their employees, agents, contractors and subcontractors), ensure that the
design, construction, operation, maintenance, management and monitoring of the
Project’s sites, plants, equipment, operations and facilities are undertaken in
compliance with (i) the Action Plan, and (ii) the applicable
requirements of the Performance Standards.

 

44

 

6.8                                 Annual Monitoring Report; S&E Management System

 

The Borrowers shall:

 

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

 

(b)                                 use all reasonable efforts to ensure the continuing implementation
and operation of the S&E Management System to assess and manage the social
and environmental performance of the Project in a manner consistent with the
Performance 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 License
Contract, and (ii) all Authorizations, including without limitation the
Authorizations specified in Schedule 3 (Authorizations),
which are necessary for the implementation of the Project, the carrying out of
the Borrowers’ business and operations generally and the compliance by the
Borrowers with all their obligations under the Transaction Documents; and

 

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

 

6.10                           Financial Ratios

 

The Borrowers shall at all
times 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 reputable
insurers, and in accordance with local regulations, all its assets and business
against all 

 

45

 

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 amounts
necessary for effecting and maintaining in force each insurance policy;

 

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

 

(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, anything
which might prejudice the Borrowers’, or, where any Finance Party is an
additional named insured, such Finance Party’s right to claim or recover under
any insurance policy; and

 

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

 

provided always that, if at any
time and for any reason any insurance required to be maintained under this
Agreement shall not be in full force and effect, then the Facility Agents shall
thereupon, or at any time while the same is continuing, be entitled (but have
no such obligation) on their own behalf to procure that insurance at the
expense of the Borrowers and to take all such steps to minimize hazard as each
of the Facility Agents may consider expedient or necessary.

 

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

 

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

 

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

 

(iii)                               where relevant, all its provisions (except those relating to limits
of liability) shall operate as if they were a separate policy covering each
insured party.

 

46

 

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

 

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

 

(i)                                     as soon as possible after its occurrence, notice of any event which
entitles any Borrower to claim for an aggregate amount exceeding the equivalent
of 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 any
Borrower, a copy of that policy incorporating any provisions required under Section 6.12
(b) (iv) (unless that policy has already been provided to the
Facility Agents pursuant to Section 4.1(i) (Conditions Precedent);

 

(iii)                               not less than ten (10) days prior to the expiry date of any
insurance policy (or, for insurance with multiple renewal dates, not less than
ten (10) days prior to the expiry date of the policy on the principal
asset), a certificate of renewal from the insurer, insurance broker or agent
confirming the renewal of that policy and the renewal period, the premium, the
amounts insured for each asset or item and any changes in terms or conditions
from the policy’s issue date or last renewal, and confirmation from the insurer
that provisions naming the Finance Parties as additional named insured remain
in effect;

 

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

 

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

 

6.12                           Security

 

(a)                                  The Borrowers shall from time to time, execute, acknowledge and
deliver or cause to be executed, acknowledged and delivered such further
instruments as may necessary or may reasonably be requested by any Facility
Agent for perfecting or maintaining in full force and effect the Security or
for re-registering the Security or otherwise and, if necessary, create and
perfect additional Security to enable the Borrowers to comply with their obligations
under the Transaction Documents;

 

(b)                                 The Borrowers shall cause the registration of the Participations
Pledge and the Flow Trust with the Movable Registry of Contracts (Registro Mobiliario de Contratos) in Peru to be completed
prior to the earlier of (i) the first Disbursement under the Additional
Secured Facility and (ii) forty-five (45) days following the first
Disbursement of the IFC Loans; and

 

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

 

47

 

S.A. to deliver written notice
to Petroperu instructing Petroperu to cease making payments to the trust
established under the Import Duty Contract and (ii) together with La
Fiduciaria S.A., deliver written notice to Petroperu instructing Petroperu to
make all payments to the Flow Trust.

 

6.13                           Further Documents

 

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

 

6.14                           Costs and Expenses

 

(a)                                  The Borrowers shall pay or, as the case may be, reimburse each
Finance 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 in
connection with the execution, issue, delivery, registration or notarization of
the Transaction Documents and any other documents related to this Agreement or
any other Transaction Document.

 

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

 

(i)                                     the documented fees and expenses of the Independent Engineer, the
Insurance Consultant and the Lenders’ other technical and market consultants
incurred in connection with the Loans and investment provided for under the
Finance Documents;

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

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

 

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

 

(iii)                               the costs and expenses incurred by each of the Facility Agents in
relation to efforts to enforce or protect its rights under any Transaction
Document, or the exercise of its rights or powers consequent upon or arising
out of the occurrence of any Event of Default or Potential Event of Default,
including documented legal and other professional consultants’ fees on a full
indemnity basis.

 

6.15                           Financial Model

 

The Borrowers shall, promptly
upon becoming aware that there are any defects in the Financial Model which
might 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 within
fifteen (15) days after the end of each month of each Financial Year, deliver
to each of the Facility Agents a report of BPZ Exploración summarizing key
testing and production data for the Corvina Field and the other Borrowing Base
Assets, 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 in
any event within sixty (60) days after the end of each quarter of each
Financial Year, deliver to each of the Facility Agents:

 

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

 

(ii)                                  a report (in
the form pre-agreed by the Facility Agents) by the
Borrowers on their respective operations during that quarter or, so long as BPZ
Resources is a reporting company under the U.S. Securities Exchange Act of
1934, a copy of BPZ Resources’ quarterly report (Form 10-Q) as filed with
the U.S. Securities and Exchange Commission;

 

49

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 a statement by the Borrowers of all transactions between each
Borrower and each of its Affiliates, if any, during that Financial Year, and a
certification by the Borrowers’ chief financial officer that those transactions
were 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 to
Perupetro, deliver to each Facility Agent copies of each Field Development
Plan, report, notice or other material communication delivered pursuant to each
License Contract.

 

50

 

(ii)                                  Promptly following the designation of any Petroleum Assets as
Borrowing Base Assets, deliver to each Facility Agent a copy of the License
Contract related thereto (if not previously so delivered) together with a legal
opinion of Peruvian counsel to the Borrowers substantially in the form
delivered pursuant to Section 4.1(k)(i) with respect to matters
relating to such License Contract.

 

(e)                                  Reserve Certification; Base Case
Updates.

 

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

 

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

 

(f)                                    Annual Monitoring Report. 
Within ninety (90) days after the end of each Financial Year, deliver to
the Facility Agents the corresponding Annual Monitoring Report confirming
compliance with the Action Plan, the social and environmental covenants set
forth 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 to
remedy it;

 

(g)                                 Notice of Accidents, Etc.   Within three (3) days after such Borrower
becomes aware of its occurrence, notify the Facility Agents of any social,
labor, health and safety, security or environmental incident, accident or
circumstance having, or which could reasonably be expected to have, a Material
Adverse Effect or material adverse impact on the implementation or operation of
the Project in accordance with the Performance Standards, specifying in each
case the nature of the incident, accident, or circumstance and any effect
resulting or likely to result therefrom, and the measures the Borrower is
taking or plans to take to address them and to prevent any future similar
event; and keep the Facility Agents informed of the on-going implementation of
those measures and plans;

 

(h)                                 Partner Matters.  As soon as reasonably available, deliver to
the Facility Agents two (2) copies of: (i) all notices, reports and
other communications of such Borrower to its partners (other than notifications
to its partners of any meeting of its partners), whether any such communication
has been made on an individual 

 

51

 

basis or by
way of publication in a newspaper or other communication medium; and (ii) the
minutes of all partners’ meetings.

 

(i)                                     Changes to Project; Material Adverse Effect.  Within five (5) Business
Days of (x) deciding on any proposed change in the nature or scope of the
Project or the business or operations of the Borrower and (y) becoming
aware of the occurrence of any event or condition that has or may reasonably be
expected to have a Material Adverse Effect, notify the Facility Agents thereof;

 

(j)                                     Litigation, Etc.  Within five (5) Business Days of
becoming aware of any litigation or administrative proceedings before any
Authority or arbitral body which has or may reasonably be expected to have a
Material Adverse Effect, notify the Facility Agents by facsimile of that event
specifying the nature of that litigation or those proceedings and the steps the
Borrower is taking or proposes to take with respect thereto;

 

(k)                                  Default.  Within one (1) Business Day of becoming
aware 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 of
Default or Potential Event of Default and any steps the Borrower is taking to
remedy it;

 

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

 

(m)                               Other  Information.  Promptly provide to the Facility Agents such
other information as any Facility Agent from time to time reasonably requests
about the Borrower, its assets and the Project.

 

6.17                           Receivables

 

Each Borrower shall irrevocably
instruct each Person who is or becomes a party to (i) an Offtake
Agreement, (ii) a contract with respect to Insurances or (iii) any
other contract with such Borrower (other than any Finance Party) involving
aggregate payments to such Borrower in excess of $100,000 (or each Person who
otherwise 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 such
Borrower shall be made, and such Borrower hereby agrees to cause each such
Person to make all such payments, directly to the Revenue Account; provided
that, with respect to the Flow Trust, the Borrowers’ revenues may continue to
be paid to the trust established under the Import Duty Contract until the
proceeds of the first Disbursement of the IFC Loans have been applied in
accordance with Section 4.4(f)(i)(z) and Petroperu has been notified
to commence payments to the Flow Trust in accordance with Section 6.12.  If any Borrower receives any payment other
than to the Revenue Account, whether directly or to a bank account other than
the 

 

52

 

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

 

6.18                           Import Duty Contract

 

The Borrowers
shall 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 first
Disbursement under the Additional Secured Facility, deliver to the Facility
Agents evidence that all revenues of the Borrowers are being paid to the Flow
Trust and that any amendment to or termination of the Import Duty Contract has
been recorded in the Movable Registry of Contracts (Registro
Mobiliario de Contratos) in Peru.

 

6.19                           Satisfaction of Special Conditions

 

The
conditions precedent set forth in Section 4.3 shall have been fulfilled in
form and substance satisfactory to IFC no later than November 30, 2008.

 

7.                                      NEGATIVE COVENANTS

 

7.1                                 Distributions

 

Neither Borrower shall declare
or pay any dividend, or make any distribution on its equity capital, or
purchase, redeem or otherwise acquire any Participations or any option over the
same, or make any payment, distribution or cash transfer to any holder of
equity interests in the Borrower (or any Affiliate), including any payment in
respect 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 and
is continuing; and

 

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

 

provided, however, that, any of the foregoing shall
only be made on a semi-annual basis, on any date occurring after an Interest
Payment Date but no later than ten (10) days thereafter and provided, further, that, prior to January 31, 2009, BPZ Exploración shall have the right
to 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 the
matters referred to in Section 7.1 (a) to each Facility Agent in
writing, in the form attached as Exhibit E (Form of
Distribution Request).

 

53

 

7.2                                 Expenditures

 

Neither Borrower shall incur expenditures or commitments for expenditures
for fixed or other non-current assets, other than those required for carrying
out the Project as contemplated in the Base Case or necessary for repairs,
replacements and maintenance of satisfactory operating conditions that are
essential to such Borrower’s business or operations and in each case which do
not, during any Calculation Period, exceed the aggregate amount therefor
reflected in the Base Case.

 

7.3                                 Financial Debt

 

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

 

7.4                                 Guarantees and Other Obligations

 

Neither Borrower shall enter
into any agreement or arrangement to guarantee or, in any way or under any
condition, assume or become obligated for all or any part of any financial or
other obligation of another Person, except for Permitted Nueva Esperanza Credit
Support and except for the joint and several obligations of the Borrowers under
the Finance Documents.

 

7.5                                 Derivative Transactions

 

Neither Borrower shall:

 

(a)                                  enter into any Derivative Transaction, other than Derivative
Transactions entered into in the ordinary course of business that do not
require any collateral (cash or otherwise), except with the prior written
consent of the Facility Agents; or

 

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

 

7.6                                 Liens

 

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

 

7.7                                 Arm’s Length Transactions

 

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

 

54

 

7.8                                 Exclusive Purchasing or Sales Agency Arrangements

 

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

 

7.9                                 Profit-sharing

 

Neither Borrower shall enter
into any partnership, profit-sharing or royalty agreement or other similar
arrangement whereby such Borrower’s income or profits are, or might be, shared
with any other Person, except for (i) mandatory sharing of profits with
employees required under the Laws of Peru or (ii) the Shell Farm-Out
Agreement.

 

7.10                           Entry into Agreements

 

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

 

7.11                           No Subsidiaries; Transfers of Subsidiary Capital

 

Except for BPZ Marine being a
Subsidiary of BPZ Exploración, neither Borrower shall form or have any
Subsidiary.  BPZ Exploración shall not (a) sell,
assign, transfer or otherwise dispose of, or grant or permit to exist any Lien
on, any Participations or other capital of BPZ Marine, other than the Liens
created in favor of the Collateral Agent created pursuant to the Participations
Pledge or (b) permit the creation of additional Participations in BPZ
Marine unless such Participations are owned beneficially and legally of record
by BPZ Exploración.

 

7.12                           Loans / Investments

 

Neither Borrower shall make or
permit to exist:

 

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

 

(b)                                 any investments in any Person or enterprise.

 

7.13                           Disposals

 

Neither Borrower shall
undertake any spin-off, or sell, transfer, lease or otherwise dispose of any
asset (other than sales of hydrocarbon products in the normal course of
business) whether in a single transaction or in a series of transactions,
related or otherwise, other than (i) Permitted License Transfers, (ii) in
connection with the execution, delivery and performance of the Shell Farm-Out
Agreement, (iii) obsolete or surplus equipment and (iv) other assets
which, individually or in the aggregate, are related to transactions not in
excess of $5,000,000 annually.

 

55

 

7.14                           Changes in Business, Capital, Charter and Financial Year

 

Neither Borrower shall change:

 

(i)                                     its Charter in any
manner which would be inconsistent with the provisions of any Transaction
Document;

 

(ii)                                  its Financial Year; or

 

(iii)                               the nature or scope of the Project or change the nature of its present or contemplated
business or operations.

 

7.15                           No Merger or Consolidation; Change in Control

 

Neither Borrower shall
undertake or permit any Change in Control or any amalgamation or merger with,
or acquisition of, another Person or undertake any internal consolidation or
reorganization, except in the case of a merger between the Borrowers, provided
that such merger does not affect any Liens created under the Security
Documents.

 

7.16                           Project Documents

 

Neither Borrower shall:

 

(a)                                  terminate, amend, vary, supplement, or grant any waiver with respect
to any provision of, any Project Document to which it is a party where to do so
would result in or could be reasonably expected to have a Material Adverse
Effect, or

 

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

 

7.17                           Use of Proceeds

 

Neither Borrower shall use or
apply the proceeds of any Disbursement under any Facility except in accordance
with Section 4.4(f) (Use of Proceeds).

 

7.18                           Leases

 

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

 

7.19                           Sanctionable Practices

 

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

 

56

 

covenants that should any
Facility Agent notify any Borrower of its concerns that there has been a
violation of the provisions of this Section 7 (Negative
Covenants) or of Section 5.1(r) (Sanctionable
Practices) of this Agreement, it shall cooperate in good faith with
such Facility Agent and its representatives in determining whether such a
violation has occurred, and shall respond promptly and in reasonable detail to
any notice from such Facility Agent and shall furnish documentary support for such
response upon such Facility Agent’s request.

 

7.20                           Amendment of Action Plan

 

Neither Borrower shall amend
the Action Plan in any material respect without the prior written consent of
each Facility Agent.

 

8.                                      EVENTS OF DEFAULT

 

8.1                                 Events of Default

 

Each of the following events
and occurrences shall constitute an Event of Default under this Agreement and
each Facility Agreement:

 

(a)                                  Payments under Finance Documents

 

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

 

(ii)                                  Any Borrower fails to pay when due, at the place and in the currency
in which such amount is expressed to be payable any amount as required by the
Finance Documents (other than any amounts specified in paragraph (i) above
of this Section 8.1(a)) unless such payment (together with any default
interest) 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) above
of this Section 8.1), and, if capable of being remedied, any such failure
continues unremedied for a period of thirty (30) days after the date any Lender
notifies the Borrowers of that failure.

 

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

 

57

 

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

 

(c)                                  Representations

 

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

 

(d)                                 Nationalization

 

Any Authority condemns,
nationalizes, seizes or otherwise expropriates all or any substantial part of
the property or assets of any Borrower or of its equity capital, or assumes
custody or control of any substantial part of such property or assets or of the
business or operations of any Borrower or of its equity capital, or acquires
majority ownership of any Borrower, or takes any action for the dissolution or
disestablishment of any Borrower or any action that would prevent any Borrower
or its officers from carrying on its business or operations or a substantial
part thereof.

 

(e)                                  Bankruptcy

 

Any of the following events or
circumstances arises:

 

(a)                                  any Borrower

 

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

 

(ii)                                  ceases or threatens to cease to carry on its business or any
substantial 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 otherwise
becomes insolvent; or

 

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

 

58

 

(c)                                  any encumbrancer lawfully takes possession of, or a liquidator,
judicial custodian, receiver, administrative receiver or trustee or any
analogous officer is appointed in respect of the whole or any material part of
the undertaking or assets of any Borrower or, or an attachment, sequestration,
distress or execution (or analogous process) is levied or enforced upon or
issued against any of the assets or property of any Borrower or for an amount
in excess of five hundred thousand Dollars (US$500,000) (or its equivalent in
any 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 an
effect analogous to any of those events listed in this Section 8.1(e).

 

(f)                                    Abandonment; Interruption

 

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

 

(g)                                 Authorization

 

Any Authorization necessary for
any Borrower to execute, deliver, perform or observe its obligations under any
Transaction Document to which it is a party, or to construct, own or maintain
the Project, is not obtained when required or is rescinded, terminated, lapses
or otherwise ceases to be in full force and effect or any such Authorization is
materially impaired or withheld, including with respect to the remittance to
any Finance Party or its assignees, in Dollars, of any amounts payable under
any Finance Document, and is not restored, reinstated, granted or such
impairment removed (x) within thirty (30) days of such event, or (y) with
respect to any Authorization not relating to a License Contract or a Finance
Document, such additional period, not exceeding ninety (90)
additional days in aggregate, if (A) the Borrowers are diligently
pursuing the restoration, reinstatement, or grant of such
Authorization or the removal of such impairment and (B) the failure
of such Authorization to be in full force and effect (or to have such
impairment removed) does not result in any interruption of operations of
either Borrower and has not had, and could not otherwise reasonably be expected
to have, a Material Adverse Effect.

 

(h)                                 Revocation, Etc., of Security Documents

 

Any Security Document or any of
its provisions:

 

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

 

(b)                                 becomes unlawful or is declared void; or

 

59

 

(c)                                  is repudiated or its validity or enforceability is challenged in
writing by (i) either Borrower or a grantor of any Lien under such
Security Document and any such repudiation or challenge continues for a period
of thirty (30) days during which period such repudiation or challenge has no
effect or (ii) Perupetro, except, with respect to this clause (ii), to the
extent the Borrowers have asserted their rights against Perupetro within thirty
(30) days and are diligently pursuing their remedies in good faith.

 

(i)                                     Revocation, Etc., of
Transaction Documents

 

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

 

(i)                                     is revoked, terminated or ceases to be in full force and effect, and
that event, if capable of being remedied, is not remedied to the satisfaction
of 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 its
provisions at any time is challenged in writing by either Borrower or a
counterparty to such Transaction Document (other than the Lenders) and such
repudiation or challenge is not withdrawn (x) within thirty (30) days of
such repudiation or challenge (provided that no such thirty (30) day grace
period shall apply if and when such repudiation or challenge becomes effective)
or (y) with respect to such Transaction Document other than a License
Contract or a Finance Document, such additional period, not
exceeding sixty (60) additional days in aggregate, if (A) the
Borrowers are diligently pursuing the withdrawal of such repudiation or
challenge or (B) the Borrowers shall have replaced such Transaction Document
with a contract on terms no less beneficial to the Borrowers than the
repudiated or challenged Transaction Document.

 

(j)                                     Cross-Default

 

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

 

(k)                                  Sanctionable Practices

 

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

 

60

 

(l)                                     Peruvian Repayment Restrictions

 

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

 

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

 

8.2                                 Bankruptcy

 

Notwithstanding anything to the
contrary in this Agreement, if
any Borrower is liquidated or declared bankrupt by a competent court or
administrative authority, then
all the Loans, all interest accrued on it and any other amounts payable to any
Finance Party under this Agreement or any other Finance Document will become
immediately due and payable without any presentment, demand, protest or notice
of any kind, all of which each Borrower waives.

 

8.3                                 Consequences of Default

 

On and at any time after the
occurrence of an Event of Default, any Facility Agent may by notice to the
Borrowers:

 

(a)                                  terminate all or part of the relevant Facility and cancel any
undisbursed portion of the Loans of the Lenders thereunder whereupon they shall
immediately be cancelled; and/or

 

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

 

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

 

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

 

in each case, without any
presentment, demand or protest of any kind, all of which will be expressly
waived by each Borrower.

 

61

 

9.                                      MISCELLANEOUS

 

9.1                                 Term of Agreement

 

This Agreement shall continue
in force until the Final Discharge Date, provided that the indemnities of any
Borrower 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 Secured
Facility Lenders shall become party hereto upon the execution and delivery by
the Additional Secured Facility Agent of an Accession Agreement.

 

(b)                                 Any amendment to, waiver by any Finance Party of any of the terms or
conditions of, or consent given by any Finance Party under, this Agreement
(including this Section 9.2) or any other Finance Document shall be in
writing, 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 deemed
to have agreed to all of the terms and conditions of such waiver.

 

9.3                                 Notices

 

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

 

For
the Borrowers:

 

BPZ Exploración &
Producción S.R.L.

BPZ Marine Peru S.R.L.

Attention:  General Manager

Manual de
Falla #297

San Borja,
Lima

Peru

 

Facsimile:  (011-511) 225-3289

 

and

 

62

 

BPZ Resources
Inc.

Attention:  Chief Financial Officer or General Counsel

Two Westlake

580 Westlake
Park Blvd., Suite 525

Houston, Texas
77079

 

Facsimile:
(281) 556-6377

 

For
IFC:

 

International Finance
Corporation

2121 Pennsylvania Avenue, N.W.

Washington DC 20433

United 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 furnished
or communications to be given or made under this Agreement or any other Finance
Documents shall be in the English language or, if in another language, be
accompanied by a translation into English certified by the Borrowers, which
translation shall be the governing version between the Borrowers and the
Finance Parties. For the avoidance of doubt, all reasonable costs relating to
any 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 any
misrepresentations or breach of warranty on the part of any Borrower shall not
be prejudiced by any investigation by or on behalf of any Finance Party into
the affairs of such Borrower, by the execution or the performance of this
Agreement or the other Finance Documents or by any other act or thing which may
be done by or on behalf of any Finance Party in connection with this Agreement
or the other Finance Documents and which might, apart from this Section 9.5,
prejudice such rights or remedies.

 

63

 

(b)                                 No course of dealing or waiver by any Finance Party in connection
with any condition of Disbursement under this Agreement or any other Finance
Document shall impair any right, power or remedy of such Finance Party with
respect to any other condition of Disbursement or be construed to be a waiver
thereof.

 

(c)                                  No action of any Finance Party in respect of any Disbursement shall
affect or impair any right, power or remedy of such Finance Party in respect of
any other Disbursement.  Without limiting
the foregoing, the right of a Finance Party to require compliance with any
condition under this Agreement or any other Finance Document which may be
waived by such Finance Party in respect of any Disbursement is, unless
otherwise notified to the Borrowers by such Finance Party, expressly preserved
for the purposes of any subsequent Disbursement.

 

(d)                                 No course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to the Finance Parties upon any
default under this Agreement, any other Finance Document or any other agreement
shall impair any such right, power or remedy or be construed to be a waiver
thereof or an acquiescence therein.  No
single or partial exercise of any such right, power or remedy shall preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  No action of the Finance
Parties in respect of any such default, or acquiescence by it therein, shall
affect or impair any right, power or remedy of the Finance Parties in respect
of any other default.

 

(e)                                  The rights and remedies provided in this Agreement and the other
Finance Documents are cumulative and not exclusive of any other rights or
remedies, 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 its
officers, directors, employees, agents and servants from and against any cost,
damage, claim, loss, expense (including documented legal fees) or liability
imposed 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 of
Default;

 

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

 

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

 

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

 

64

 

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

 

(b)                                 Each Borrower acknowledges that each Finance Party is entering into
this Agreement and the other Finance Documents to which such Finance Party is
party, and has acted, solely as a Finance Party for the purposes of the
financing 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 other
professional advisors and it has not relied on and will not hereafter rely on
any advice given to it by any Finance Party.

 

9.7                           Jurisdiction and Enforcement

 

(a)                                  This Agreement is governed by, and shall be
construed in accordance with, the laws of the State of New York, United States
of America.

 

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

 

(c)                                  Each Borrower designates, appoints and empowers
CT Corporation System, with its address at 111 Eighth
Avenue, New York, New York 10011,
as its authorized agent to receive for and on its behalf service of any
summons, complaint or other legal process in any such action, suit or
proceeding in the State of New York.

 

(d)                                 Nothing in this Agreement or the Facility
Agreements shall affect the right of each of the Finance Parties to commence
legal proceedings or otherwise sue any Borrower in Peru or any other
appropriate jurisdiction, or concurrently in more than one jurisdiction, or to
serve process, pleadings and other papers upon any Borrower in any manner
authorized by the Laws of any such jurisdiction.

 

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

 

65

 

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

 

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

 

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

 

(h)                                 To the extent that any Borrower may, in any
suit, action or proceeding brought in any of the courts referred to in
paragraph (b) of this Section 9.7 or a court of Peru or elsewhere
arising out of or in connection with this Agreement or any other Finance
Document to which the Borrower is a party, be entitled to the benefit of any
provision of Law requiring any of the Finance Parties in such suit, action or
proceeding to post security for the costs of such Borrower (cautio judicatum solvi), or to post a bond
or to take similar action, such Borrower hereby irrevocably waives such
benefit, in each case to the fullest extent now or in the future permitted
under the laws of Peru or, as the case may be, the jurisdiction in which such
court is located.

 

(i)                                     Each Borrower also irrevocably consents, if for any reason the
Borrower’s authorized agent for service of process of summons, complaint and
other legal process in any such action, suit or proceeding is not present in
New York, New York, to service of such papers being made out of the courts
referred to in Section 9.7(b) by mailing copies of the papers by
registered air mail, postage prepaid, to such Borrower at its address specified
in Section 9.3 (Notices).  In such a case, the relevant Finance Party
shall also send by facsimile, or have sent by facsimile, a copy of the papers
to such Borrower.

 

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

 

66

 

(k)                                  Each Borrower irrevocably waives to the fullest extent permitted by
applicable law:

 

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

 

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

 

(iii)                               its right of removal of any matter commenced by any Finance Party in the
courts 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 or
proceeding brought against such Borrower by any Finance Party.

 

(l)                                     Each Borrower hereby acknowledges that IFC shall be entitled under
applicable law, including the provisions of the International Organizations
Immunities Act, to immunity from a trial by jury in any action, suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby brought against IFC in any court of the United States of
America.  Each Borrower hereby waives any
and all rights to demand a trial by jury in any action, suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
by this Agreement, brought against IFC in any forum in which IFC is not
entitled to immunity from a trial by jury.

 

9.8                                 Privileges and Immunities

 

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

 

9.9                                 Successors and Assigns

 

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

 

(b)                                 Each Finance Party may sell, transfer, assign, novate or otherwise
dispose of all or part of its rights or obligations under this Agreement and
any other Finance Document (including by granting of participations) in
accordance with the provisions of its respective Facility Agreement.

 

67

 

9.10                           Nature of Finance Parties’ Rights and Obligations

 

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

 

9.11                           Counterparts

 

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

 

9.12                           Effectiveness

 

This Agreement shall become
effective as at the date hereof.

 

68

 

IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized
representatives, have caused this Agreement to executed as of the date first
above written.

 

69

 

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

  

 

 

SCHEDULE
1

MAXIMUM 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

 

SCHEDULE 2

ANTI-CORRUPTION GUIDELINES FOR IFC TRANSACTIONS

 

The
purpose of these Guidelines is to clarify the meaning of the terms “Corrupt
Practices”, “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, directly
or indirectly, of anything of value to influence improperly the actions of
another party.

 

INTERPRETATION

 

A.            Corrupt practices are understood as kickbacks
and bribery.  The conduct in question
must involve the use of improper means (such as bribery) to violate or derogate
a duty owed by the recipient in order for the payor to obtain an undue
advantage or to avoid an obligation. 
Antitrust, securities and other violations of law that are not of this
nature are excluded from the definition of corrupt practices.

 

B.            It is acknowledged that foreign investment
agreements, concessions and other types of contracts commonly require investors
to make contributions for bona fide social development purposes or to provide
funding for infrastructure unrelated to the project. Similarly, investors are
often required or expected to make contributions to bona fide local charities.
These practices are not viewed as Corrupt Practices for purposes of these
definitions, so long as they are permitted under local law and fully disclosed
in the payor’s books and records. Similarly, an investor will not be held
liable for corrupt or fraudulent practices committed by entities that
administer bona fide social development funds or charitable contributions.

 

C.            In the context of conduct between private
parties, the offering, giving, receiving or soliciting of corporate hospitality
and gifts that are customary by internationally-accepted industry standards
shall not constitute corrupt practices unless the action violates applicable
law.

 

D.            Payment by private sector persons of the
reasonable travel and entertainment expenses of public officials that are
consistent with existing practice under relevant law and international
conventions will not be viewed as Corrupt Practices.

 

E.             The World Bank Group does not condone
facilitation payments.  For the purposes
of implementation, the interpretation of “Corrupt Practices” relating to
facilitation payments will take into account relevant law and international
conventions pertaining to corruption.

 

1

 

2.             FRAUDULENT
PRACTICES

 

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

 

INTERPRETATION

 

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

 

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

 

3.             COERCIVE
PRACTICES

 

A “Coercive Practice” is 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.

 

INTERPRETATION

 

A.            Coercive Practices are
actions undertaken for the purpose of bid rigging or in connection with public procurement or
government contracting or in furtherance of a
Corrupt Practice or a Fraudulent Practice.

 

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

 

4.             COLLUSIVE
PRACTICES

 

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

 

2

 

INTERPRETATION

 

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

 

5.             OBSTRUCTIVE  PRACTICES

 

An “Obstructive Practice” is (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, fraudulent, coercive 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, fraudulent, coercive or collusive practice.

 

INTERPRETATION

 

Any action legally or otherwise properly taken by a
party to maintain or preserve its regulatory, legal or constitutional rights
such as the attorney-client privilege, regardless of whether such action had
the effect of impeding an investigation, does not constitute an Obstructive
Practice.

 

GENERAL INTERPRETATION

 

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

 

3

 

SCHEDULE 3

 

AUTHORIZATIONS

 

SECTION 1

 

AUTHORIZATIONS ALREADY OBTAINED

 

1.             Corporate
registrations

 

(a)           Memorandum and Articles of Incorporation;

 

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

 

2.             Corporate
Approvals

 

Resolution of the partners’
meeting of the Borrower authorising the Borrower to enter into the Finance
Documents and detailing the names of the Authorized Representatives that will
sign all agreements and documents on behalf of the Borrower.

 

3.             Currency
Control

 

None.

 

4.             Production of Oil

 

                Block Z-1 License.

 

5.             Transportation and Navigation

 

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

 

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

 

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

 

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

 

1

 

(v)           BPZ-02 Barge: Certificate of Classification, issued by
the 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 Navigation
Certificate, issued by the Panama Maritime Authority.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

(xx)          Nu`uanu Barge: Shipboard Oil Pollution Emergency Plan
Approval (SOPEP Certificate) issued by the Panama Maritime Documentation
Services Inc.

 

6.             Environment

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

4

 

SECTION 2

 

AUTHORIZATIONS TO BE OBTAINED PRIOR TO FIRST DISBURSEMENT

 

A.            Borrowers

 

1.             Perfection
of Security

 

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

 

2.             Currency
Control

 

None.

 

5

 

SCHEDULE 4

INSURANCE

 

1.                                      Operational Insurances — Energy Package:

 

A.                 COVERAGE:

 

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

 

Section B:                                          Sabotage and Terrorism

 

Section C:                                          Machinery Breakdown.

 

Section D:                                         Operator’s Extra Expense including Control of Well, Extended and
Restoration Cost Redrill, Seepage and Pollution and Clean Up and
Containment, 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 to
the 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 and
additional limit of 25% of insured values in respect of Removal of Debris
and/or Wreck, and General Average Salvage Costs.

 

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

 

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

 

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

 

1

 

Section E:                                           Gross estimated profits or an amount at least equal to the estimated
Debt 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 respect
of 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

 

Other
insurance which:

 

a)                                      is customary or necessary to comply with local or other
requirements, such as contractual insuring responsibility, Workers’
Compensation and Employers’ Liability insurances in relation to all workmen
employed at the Project or in connection with its operation; motor vehicle
liability insurance for all vehicles owned, hired, leased,  used or borrowed for use in the Country
in 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 to
this Schedule 4 shall provide:

 

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

 

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

 

b)                                     Each policy effected pursuant to this Schedule 4:

 

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

 

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

 

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

 

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

 

d)                                     If at any time and for any reason any insurance required to be maintained
under this Schedule 4 is not in full force and effect then, without prejudice
to the rights of the Facility Agents, the Facility Agents shall be entitled
thereupon, or at any time while the same is continuing, to procure such
insurance at the expense of the Borrowers.

 

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

 

3

 

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) the
Common Terms Agreement dated as of August  15, 2008 (the “Common Terms
Agreement”) between the Borrowers and the financial institutions listed therein
as the Lenders and (ii) the Finance Documents referred to in the Common
Terms Agreement.

 

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

 

IT IS AGREED as follows:

 

1.                                      Definitions

 

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

 

2.                                      Accession of Acceding
Lender

 

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

 

(b) The Acceding Lender confirms that
its 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 number
of counterparts and this has the same effect as if the signatures on the
counterparts were on a single copy of this Agreement.

 

1

 

4.                                      Jurisdiction and Enforcement

 

The provisions of Section 9.7
of 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 as
the governing law applicable to this Agreement.

 

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

 

Signatories to the Accession
Agreement:

 

ACCEDING
LENDER

 

[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:

  

 

2

 

Exhibit B
- Form of Certificate of Incumbency and Authority

 

[To
be 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 Marine
Peru S.R.L., as the borrowers (the “Borrowers”),
and

 

                                                (2) International Finance Corporation, and the Additional
Secured 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 Facility
Agreements shall bear the same meanings herein.

 

3.                                       I, the undersigned [President][Chairman of the Board of
Directors][Director] of [each of] the Borrower[s], duly authorized by its Board
of Directors, hereby certify that the following are the names, offices and true
specimen signatures of the Persons, any one of whom is and will continue to be
until each of the Facility Agents has received actual written notice from the
Borrower[s] that they or any of them no longer continue to be) authorized, on
behalf 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 Loan
Agreement), any Disbursement Applications, certifications, letters or other
documents to be provided under any such Finance Documents and any other
agreements to which the Borrowers and the Finance Parties are party; and

 

1

 

Schedule B

 

(b)                                 to take any other action required or permitted to be taken by the
Borrowers under the Finance Documents to which they are a party or any other
agreement to which the Borrowers and the Finance Parties may be party in
connection 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]

  
				

 

2

 

Exhibit C
- Form of Letter to Auditors

 

[To
be typed on letterhead of each Borrower]

 

[Date]

 

[Name of Auditors]

[Address]

 

Dear Sirs:

 

We hereby authorise and request you to give
to [NAME OF THE FACILITY AGENT] (the “Facility Agent”),
all such information as it may reasonably request with regard to the financial
statements, both audited and unaudited, which we have agreed to furnish under
the 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 accounts
to the Facility Agent, together with all such related confirmations,
certificates or reports, in each case, to enable us to satisfy the reporting
requirements set forth in Section 6.16 of the Common Terms Agreement.  When submitting such audited accounts to the
Facility Agent you are also requested to send, at the same time, a copy of your
full report on such accounts.

 

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

 

Yours faithfully,

 

[Name of Borrower]

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Representative

  

 

 

Enclosure: 
Common Terms Agreement

 

Copy to:

 

1

 

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 Secured
Facility Lenders (following accession thereto) (the “Lenders”).  Unless otherwise defined herein, capitalized
terms used herein shall have the meaning specified in the Common Terms
Agreement.

 

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 [          ],as
its authorized agent to receive for and on its behalf service of process in any
legal action or proceeding with respect to the Common Terms Agreement and the
other Finance Documents to which it is a party brought in the courts of the
State of New York.

 

The undersigned hereby informs you that it has irrevocably accepted
that appointment as process agent as set forth in Section 9.7(c) of
the Common Terms Agreement from               (1) until
                      (2) and
agrees with you that the undersigned (i) shall inform the Lenders promptly
in writing of any change of its address in New York, (ii) shall perform
its obligations as such process agent in accordance with the relevant
provisions of the Common Terms Agreement, and (iii) shall forward promptly
to the Borrowers any legal process received by the undersigned in its capacity
as process agent.

 

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

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [                                              ]

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  

 

(1) Insert
date of effectiveness of appointment.

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

 

1

 

Exhibit E
- Form of Distribution Request

 

[To
be 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. (“BPZ
Exploración”) and BPZ Marine Peru S.R.L. (“BPZ Marine”)
as the borrowers (the “Borrowers”),
and

 

(2)                                  International Finance Corporation and the Additional Secured
Facility 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 the
Common Terms Agreement and the Facility Agreements shall bear the same meanings
herein.

 

2.                                       This is to inform you that [BPZ Exploración] [BPZ Marine] plans a
[distribution of dividends] [payment in respect of Permitted Partner
Subordinated Loans] [return of capital] to [its holders of Participations] [the
lender 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, such
Borrower hereby certifies that, as at the date hereof:

 

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

 

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

 

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

 

1

 

Schedule E

 

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

 

 

	
   

  	
  Yours truly,

  
	
   

  	
   

  
	
   

  	
  [BPZ
  Exploración & Producción S.R.L./BPZ Marine S.R.L.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Authorized Representative

  

 

2

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