Exhibit 10.1

INVESTMENT NUMBER 24346

C Loan Agreement

between

BPZ RESOURCES, INC.
(formerly BPZ Energy, Inc.)

and

INTERNATIONAL FINANCE CORPORATION

Dated November 19, 2007

TABLE OF CONTENTS

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C LOAN AGREEMENT

C LOAN AGREEMENT (the “Agreement”) dated November 19, 2007, between BPZ RESOURCES, INC. (formerly BPZ Energy, Inc.), a corporation organized and existing under the laws of the State of Texas (the “Borrower”); and INTERNATIONAL FINANCE CORPORATION, an international organization established by Articles of Agreement among its member countries including the United States of America and the Republic of Peru (“IFC”).

ARTICLE I

Definitions and Interpretation

Section 1.01.  Definitions.  Wherever used in this Agreement, the following terms have the meanings opposite them:

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Section 1.02.  Financial Calculations.  (a) All financial calculations to be made under, or for the purposes of, this Agreement and any other Financing Document shall be made in accordance with the Accounting Standards and, except as otherwise required to conform to any provision of this Agreement, shall be calculated from the then most recently issued quarterly report (Form 10-Q) which the Borrower is obligated to furnish to IFC under Section 5.03 (a) (Reporting Requirements).

(b)           The audited financial statements for a Financial Year shall be used for the purpose of making financial calculations with respect to the last quarter of such Financial Year.

(c)           If a financial calculation is to be made under or for the purposes of this Agreement on a Consolidated Basis, that calculation shall be made by reference to the sum of all amounts of similar nature reported in the relevant financial statements of each of the entities whose accounts are to be consolidated with the accounts of the Borrower plus or minus the consolidation adjustments customarily applied to avoid double counting of transactions among any of those entities, including the Borrower.

Section 1.03.  Interpretation.  In this Agreement, unless the context otherwise requires:

(a)           headings are for convenience only and do not affect the interpretation of this Agreement;

(b)           words importing the singular include the plural and vice versa;

(c)           a reference to an Annex, Article, party, Schedule or Section is a reference to that Article or Section of, or that Annex, party or Schedule to, this Agreement;

(d)           a reference to a document includes an amendment or supplement to, or replacement or novation of, that document but disregarding any amendment, supplement, replacement or novation made in breach of this Agreement; and

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

Section 1.04.  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).

ARTICLE II

The C Loan

Section 2.01.  The C Loan.  Subject to the provisions of this Agreement, IFC agrees to lend, and the Borrower agrees to borrow, the C Loan consisting of fifteen million five hundred thousand Dollars ($15,500,000).

Section 2.02.  Disbursement Procedure.  (a) The Borrower may request the Disbursement by delivering to IFC, at least five (5) Business Days prior to the proposed date of disbursement, a Disbursement request substantially in the form of Exhibit B.

(b)           The Disbursement shall be made by IFC at a bank in Houston, Texas or any other place acceptable to IFC, all as specified by the Borrower in the Disbursement request.

(c)           The Borrower shall deliver to IFC a receipt, substantially in the form of Exhibit C, within five (5) Business Days following the Disbursement.

Section 2.03.  Interest.  Subject to the provisions of Section 2.05 (Default Rate Interest), the Borrower shall pay interest on the C Loan in accordance with this Section 2.03:

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

(b)           Interest on the C 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; provided that in the event the Disbursement is made less than fifteen (15) days before an Interest Payment Date, interest on the C Loan shall be payable commencing on the second Interest Payment Date following the date of the Disbursement.

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(c)           Subject to Section 2.04 (Change in Interest Period), 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 the first Interest Period, 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, 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 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 the Loan Currency and otherwise in accordance with Section 2.03 (c) (ii), by any four (4) major banks active in the Loan Currency 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 the Loan Currency 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 Borrower 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 Borrower (unless the determination involves manifest error).

Section 2.04.  Change in Interest Period.  Without prejudice to the provisions of Section 2.05 (Default Rate Interest), if at any time the Borrower fails to pay any amount of principal of, or interest on, the C Loan when due (whether at stated maturity or upon acceleration), and any part of that amount remains unpaid on the third Business Day immediately preceding any Interest Payment Date falling after that amount became due, then:

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(a)           IFC may elect that the duration of the Interest Period commencing on that Interest Payment Date and, subject to Section 2.04 (c), any subsequent Interest Period shall be either three (3) months or one (1) month and shall notify the Borrower of that election in the notice referred to in Section 2.03 (e) (Interest);

(b)           the Interest Rates applicable to any Interest Period which is three (3) months or one (1) month shall be determined in accordance with Section 2.03 (Interest) in all respects, except that any reference in Section 2.03 (c) (ii) to six (6) months shall be deemed to be a reference to three (3) months or, as the case may be, one (1) month; and

(c)           unless an Event of Default or Potential Event of Default has occurred and is continuing, IFC shall reinstate Interest Periods of six (6) months as of the first Interest Payment Date which is May 15 or November 15 falling at least three (3) Business Days after the payment default is remedied in full and shall inform the Borrower of that reinstatement in the notice referred to in Section 2.03 (e) (Interest).

Section 2.05.  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 the Borrower fails to make any payment of principal, interest (including interest payable pursuant to this Section) or any other payment provided for in Section 2.08 (Fees) when due as specified in this Agreement (whether at stated maturity or upon acceleration), the Borrower 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.

(b)           Interest at the rate referred to in Section 2.05 (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 2.06.  Repayment.  Subject to Section 1.04 (Business Day Adjustment), the Borrower shall repay the C Loan in its entirety on November 19, 2017.

Section 2.07.  Prepayment.  (a) The Borrower may prepay the C Loan in its entirety, on not less than ten (10) days’ prior notice to IFC, only in the event described in Section 5.02 (e) (Negative Covenants) and only if:

(i)                                     the Borrower simultaneously pays all accrued interest and Increased Costs (if any) on the amount of the C Loan to be prepaid, together with the prepayment premium specified in Section 2.07 (b) and all other amounts then due and payable under this Agreement, including the amount payable under Section 2.12 (Unwinding Costs), if the prepayment is not made on an Interest Payment Date; and

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(b)           On the date of the prepayment of the C Loan in accordance with Section 2.07 (a), the Borrower shall pay the Prepayment Premium.  The determination by IFC of the Prepayment Premium shall be final and conclusive and bind the Borrower (unless such determination involved manifest error).

(c)           Upon delivery of a notice in accordance with Section 2.07 (a), the Borrower shall make the prepayment in accordance with the terms of that notice; provided, that in the event a Corporate Transaction (in connection with which such prepayment is intended) does not close in accordance with its terms, the Borrower shall not be obligated to make the prepayment as provided in such notice, subject to the payment of any costs, expenses or losses payable under Section 2.12.

Section 2.08.  Fees.  (a) The Borrower shall pay to IFC a commitment fee:

(b)           The Borrower shall also pay to IFC:

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(c)           The Borrower shall also pay to IFC a processing fee of five thousand Dollars ($5,000) for each waiver requested by the Borrower under any Financing Document and for each amendment made to any Financing Document after the Disbursement date.

Section 2.09.  Currency and Place of Payments.  (a) The Borrower shall make all payments of principal, interest, fees, and any other amount due to IFC under this Agreement in the Loan Currency, in same day funds, to the account of IFC at Citibank, N.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇.▇., ABA#▇▇▇▇▇▇▇▇▇ for credit to IFC’s account number ▇▇▇▇▇▇▇▇, or at such other bank or account in New York as IFC from time to time designates in writing.  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 the Loan Currency shall not novate, discharge or satisfy the obligation of the Borrower to pay in the Loan Currency all amounts payable under this Agreement except to the extent that (and as of the date when) IFC actually receives funds in the Loan Currency in the account specified in, or pursuant to, Section 2.09 (a).

(c)           The Borrower 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 the Loan Currency or any place other than the account specified in, or pursuant to, Section 2.09 (a); provided that the foregoing shall not apply if such payment was requested by IFC to be made in any other currency other than the Loan Currency.  The Borrower shall, as a separate obligation, pay such additional amount as is necessary to enable IFC to receive, after conversion to the Loan Currency at a market rate and transfer to that account, the full amount due to IFC under this Agreement in the Loan Currency and in the account specified in, or pursuant to, Section 2.09 (a).

(d)           Notwithstanding the provisions of Section 2.09 (a) and Section 2.09 (b), IFC may require the Borrower 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 the Loan Currency.

Section 2.10.  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 Borrower may give to the contrary.

Section 2.11.  Increased Costs.  On each Interest Payment Date, the Borrower shall pay, in addition to interest, the amount which IFC from time to time notifies to the Borrower in an Increased Costs Certificate as being the aggregate Increased Costs of IFC accrued and unpaid prior to that Interest Payment Date.

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Section 2.12.  Unwinding Costs.  (a) If IFC incurs any cost, expense or loss as a result of the Borrower:

then the Borrower shall immediately pay to IFC the amount that IFC from time to time notifies to the Borrower as being the amount of those costs, expenses and losses incurred; provided, however, that the Borrower shall not be liable for any such costs, expenses or losses in connection with the conversion of the Conversion Amount into Common Stock pursuant to Article VII (Conversion of the C Loan).

(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, ▇▇▇▇▇▇ or swaps in order to make, maintain, fund or hedge all or any part of the Disbursement or prepayment of the C Loan, or any payment of all or part of the C Loan upon acceleration.

Section 2.13.  Suspension or Cancellation by IFC.  (a) IFC may, by notice to the Borrower, suspend the right of the Borrower to the Disbursement or cancel the Disbursement in whole or in part:

(b)           Upon the giving of any such notice, the right of the Borrower to the Disbursement 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 2.13 (a) and shall not limit any other provision of this Agreement. Upon any cancellation the Borrower shall 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.

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Section 2.14.  Taxes.  (a) The Borrower 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 Country or by any organization of which the Country 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 Borrower is 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 Borrower under this subsection) had those payments been made without that deduction.

(d)           If Section 2.14 (c) applies and IFC so requests, the Borrower shall deliver to IFC official tax receipts evidencing payment (or certified copies of them) within thirty (30) days of the later of the date of that request or within ten (10) days after the receipt of such official tax receipts.

Section 2.15.  Expenses.  (a) The Borrower shall pay or, as the case may be, reimburse IFC 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 (excluding the Co-Sale Agreement) and any other documents related to this Agreement or any other Transaction Document.

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

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ARTICLE III

Representations and Warranties

Section 3.01.  Representations and Warranties.  The Borrower represents and warrants that:

(a)           Organization, etc.  The Borrower is a corporation, duly organized, validly existing and in good standing under the laws of the State of Texas, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdiction in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed could not reasonably be expected to have a Material Adverse Effect.  Each company listed in Schedule 3.01(a) hereof is duly organized, and validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified or licensed to do business and is in good standing as a foreign corporation in each other jurisdiction in which the conduct of its business or the ownership of property requires such qualification or licensing, except where failure to be so qualified or licensed could not reasonably be expected to have a Material Adverse Effect.  Except for the Subsidiaries listed in Schedule 3.01(a), the Borrower does not own, or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association or other entity;

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(b)           Authority.  The Borrower has the corporate power and authority to execute and deliver the Transaction Documents and to perform its obligations thereunder or will, in the case of any Transaction Document not executed as at the date of this Agreement, when such Transaction Document is executed, have the corporate power and authority to execute and deliver such Transaction Document and to perform its obligations thereunder, and such actions have been or will be, as the case may be, duly authorized by all necessary action of the Borrower’s Board of Directors and no other corporate action on the part of the Borrower is or will be necessary to authorize the execution, delivery and performance of the Transaction Documents.  The shares of Common Stock issuable upon conversion of the Conversion Amount have been duly reserved for issuance (subject to any adjustable number of shares) and if, as and when issued in accordance with the terms of this Agreement and delivered to IFC, such shares will be duly and validly issued and outstanding, fully paid and non-assessable and will be free of any Lien and will not be subject to preemptive rights, rights of first refusal or other restrictions on transfer, other than those imposed pursuant to the Subscription Agreement and securities laws of general application.  The issuance of such shares will not be subject to preemptive or other similar rights of any holder of the Borrower’s securities;

(c)           Enforceability.  This Agreement and all other Transaction Documents executed and delivered or to be executed and delivered by the Borrower, when delivered in accordance with the terms hereof and thereof, shall have been duly executed and delivered by the Borrower and constitute a legal, valid and binding agreement and obligation of the Borrower enforceable against it in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors’ rights;

(d)           Authorizations.  (i) (A) The Authorizations specified in Annex A 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 Borrower and its Subsidiaries to conduct their respective businesses, carry out the Project and execute, and comply with their obligations under, this Agreement and each of the other Transaction Documents to which any of them is a party;

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(e)           No Violation.  The execution and delivery by the Borrower of the Transaction Documents and the performance by the Borrower of its obligations thereunder do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, or (iii) result in a violation of, (x) any Authorization, (y) any material written or oral agreement or instrument, including, without limitation, trust instrument, indenture or evidence of indebtedness, lease, contract or other obligation or commitment binding upon the Borrower or any Subsidiary or any of their respective properties or assets, to the extent such conflict, default or violation could reasonably be expected to have a Material Adverse Effect, (z) any federal, state, or local law, rule, regulation or ordinance, or any restriction, order, writ, judgment, award, determination, injunction or decree of any Authority, or any decision or ruling of any arbitrator binding upon or applicable to the Borrower or any Subsidiary or any of their respective properties or assets, or (aa) any provision of the Charter of the Borrower or organizational documents of any of its Subsidiaries;

(f)            Litigation.  Except as set forth in the Borrower’s public SEC filings, there are no pending or, to the Borrower’s knowledge after due inquiry, overtly threatened actions, claims, orders, decrees, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could reasonably be expected to have a Material Adverse Effect, and no judgment or order has been issued which could reasonably be expected to have a Material Adverse Effect;

(g)           Charter.  The Borrower has delivered to IFC a true and correct copy of its Charter, which has not been amended since the effective date of October 11, 2007;

(h)           Capitalization. The authorized capital stock of the Borrower consists of 250,000,000 shares of Common Stock, no par value, 63,771,069 shares of which have been validly issued and are outstanding as of September 30, 2007 and are owned beneficially and legally of record by the Persons indicated on Schedule 3.01(h) (and such issued shares are fully paid and non-assessable), and 25,000,000 shares of preferred stock, no par value, none of which are issued or outstanding as of September 30, 2007.  Except as set forth on Schedule 3.01(h), the Borrower owns 100% of the capital stock of each of the Subsidiaries.  Except as set forth on Schedule 3.01(h), there do not exist any other authorized or outstanding securities, options, warrants, calls, commitments, rights to subscribe or other instruments, agreements or rights of any character, or any preemptive rights, convertible into or exchangeable for, or requiring or

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relating to the issuance, transfer or sale of, any shares of capital stock or other securities of the Borrower or any Subsidiary.  Schedule 3.01(h) contains a capitalization table showing the number of shares of Common Stock and Stock Equivalents owned by each category of holders of Common Stock and/or Stock Equivalents of the Borrower;

(i)            Financial Statements.  All of the Consolidated financial statements included in the most recent quarterly report (Form 10-Q) and annual report (Form 10-K) filed by the Borrower with the SEC (the “Borrower Financial Statements”): (i) have been prepared from and on the basis of, and are in accordance with, the books and records of the Borrower and with the Accounting Standards; (ii) fairly and accurately present in all material respects the Consolidated financial condition of the Borrower as of the date of each such Borrower Financial Statement and the results of its operations for the periods therein specified; and (iii) in the case of the annual financial statements, are accompanied by the audit opinion of the Auditors.  Except as disclosed in the Borrower’s public SEC filings, the Borrower has no liabilities other than (i) liabilities which are reflected or reserved against in the Borrower Financial Statements and which remain outstanding and undischarged as of the date hereof, (ii) liabilities arising in the ordinary course of business of the Borrower since September 30, 2007, (iii) liabilities incurred as a result of the transactions described in the Borrower’s public SEC filings, or (iv) liabilities which were not required by the Accounting Standards to be reflected or reserved on the Borrower Financial Statements;

(j)            No Material Adverse Effect.  Since September 30, 2007, except as disclosed in the Borrower’s public SEC filings, there has not been any event or change which has had or could reasonably be expected to have a Material Adverse Effect and the Borrower has no knowledge of any event or circumstance that would reasonably be expected to result in such a Material Adverse Effect;

(k)           Absence of Certain Changes.  Since September 30, 2007, except as disclosed in the Borrower’s public SEC filings, neither the Borrower nor any of its Subsidiaries has:

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(l)            Income Tax Returns.  The Borrower and the Subsidiaries have filed all federal and state income tax returns which are required to be filed, and have paid, or made provision for the payment of all taxes which have become due pursuant to said returns or pursuant to any assessment received by the Borrower or any Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided.  The Borrower has no knowledge of any pending assessments or adjustments of the income tax payable by the Borrower or its Subsidiaries with respect to any year;

(m)          Compliance with Law.  To the best of the Borrower’s knowledge after due inquiry, the Borrower and each Subsidiary are in compliance with all federal, state, or local laws, rules, regulations or ordinances, or any restrictions, orders, writs, judgments, awards, determinations, injunctions or decrees of any Authority, or any decision or ruling of any arbitrator, in the conduct of its business and corporate affairs, except where failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries has received any written notice that any violation of the foregoing is being or may be alleged;

(n)           Sanctionable Practices.  Neither the Borrower 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;

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(o)           Insurance.  The Borrower’s insurance policies cover such risks and contain such policy limits, types of coverage and deductibles as are, in the Borrower’s judgment, adequate to insure fully (subject to the deductibles and retention amounts described in Schedule 3.01(o)) against risks to which the Borrower and its employees, business, properties and other assets may be exposed in the operation of the business as currently conducted.  All of the Borrower’s insurance policies are valid and enforceable policies, all premiums due and payable under all such policies have been paid and the Borrower is otherwise in compliance in all material respects with the terms of such policies.  The Borrower has no knowledge of any threatened termination of, or material change with respect to, the terms and conditions of such policies.

(p)           Restrictions on Business Activities.  There is no agreement, judgment, injunction order or decree binding upon the Borrower which has or could reasonably be expected to have the effect of prohibiting or impairing in any material respect any of its current or future business practices, its acquisition of property or the conduct of its business as it is currently conducted or as proposed to be conducted;

(q)           ERISA.  Except as set forth in Schedule 3.01(q), each of the Borrower and Subsidiaries is in compliance in all material respects with any applicable provisions of ERISA; each of the Borrower and Subsidiaries has not violated any provision of any employee benefit plan (the “Plan”) maintained or contributed to by it; no Reportable Event (as defined in ERISA) has occurred and is continuing with respect to any Plan initiated by the Borrower or any Subsidiary; each of the Borrower and Subsidiaries has met its minimum funding requirements under ERISA with respect to any Plan; and any Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under the Accounting Standards.  Schedule 3.01(q) describes each Plan maintained by the Borrower and each of its Subsidiaries; provided each description is intended as a summary and is subject to the terms and conditions of each Plan;

(r)            Contracts.  With respect to any material written or oral agreement or instrument, including, without limitation, trust instrument, indenture or evidence of indebtedness, lease, contract or other obligation or commitment (other than the Transaction Documents), to which the Borrower or any Subsidiary is a party or to which any of its properties are subject (i) such agreement or instrument is legal, valid, binding and enforceable and in full force and effect, in each case except for bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor’s rights generally; (ii) such agreement or instrument will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the date hereof in accordance with the terms thereof as in effect prior to the date hereof; (iii) to the knowledge of the Borrower after due inquiry, the Borrower and the Subsidiaries each has performed all the obligations required to be performed by it and is entitled to all benefits thereunder, in each case, except where failure to perform individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect, and except for bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor’s rights generally; and (iv) neither the Borrower nor, to the knowledge of the Borrower, any other party is in breach or default, and no event has occurred which with notice or lapse of

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time would constitute a breach or default by the Borrower or, to the knowledge of the Borrower, by any such other party, or permit termination, modification or acceleration, under such agreement or instrument;

(s)           Environmental Matters.

(i)                                     To the best of the Borrower’s 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; and

(ii)                                  The Borrower 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;

(t)            Proprietary Rights.  The Borrower and the Subsidiaries own, have sufficient title to, or have the right to use (or can obtain the right to use on reasonable commercial terms), all Proprietary Rights necessary to their business as now conducted without infringing upon the right of any Person.  Except for employee confidentiality agreements with employees and consultants, there are no outstanding material options, licenses or agreements relating to intellectual property rights of the Borrower or any Subsidiary necessary to their business as now conducted, nor is the Borrower or any Subsidiary bound by or a party to any material options, licenses or agreements with respect to the Proprietary Rights of any other Person.  To the Borrower’s knowledge, neither the Borrower nor any Subsidiary has violated or is in current violation of, and neither the Borrower nor any Subsidiary has received any communications alleging that the Borrower or any Subsidiary has violated or, by conducting its business as proposed, would violate, any of the Proprietary Rights of any other Person.  The Borrower and the Subsidiaries are not aware of any material violation by a third party of any of their Proprietary Rights necessary to their business as now conducted;

(u)           Employees.  (i) Subject to Section 3.01 (u)(ii), all employees of the Borrower and each Subsidiary are employed “at will” and may be terminated without payment of severance or incurrence of any other liability of the Borrower or the Subsidiaries; no employee of the Borrower is in violation of any material term of any employment contract, confidentiality agreement or any other material contractual obligation relating to the right of any such employee to be employed by the Borrower or any Subsidiary; and neither the Borrower nor any Subsidiary has any employee severance agreement covering any of its employees.  Subject to Section 3.01 (u)(ii), neither the Borrower nor any Subsidiary is a party to any collective bargaining agreement or other labor union contract, nor are any union organization proceedings pending or threatened against the Borrower or any of the Subsidiaries;

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(ii)           The Borrower’s employees in the Country are subject to employment laws of the Country and are entitled to any benefits provided under such laws;

(v)           No Strikes, Etc.  There is no labor strike, slowdown or work stoppage or lockout against the Borrower or any of the Subsidiaries or against any contractor with respect to the Project;

(w)          Title to Properties.  The assets owned or leased by the Borrower and its Subsidiaries are all of the assets necessary to conduct the business of the Borrower and its Subsidiaries as currently being conducted.  The Borrower and its Subsidiaries have good and marketable title to substantially all of the assets they own, real and personal, movable and immovable, tangible and intangible, free and clear of all Liens, except for (i) liens for taxes not yet due and payable, (ii) artisan’s or mechanic’s liens arising in the ordinary course of business, (iii) encumbrances described in Schedule 3.01(w), or (iv) minor imperfections of title and encumbrances, if any, which (A) are not substantial in amount, (B) do not detract from the value of the property subject thereto, impair the operations of the business of the Borrower, or the use or license of certain of the assets of the Borrower, and (C) have arisen in the ordinary course of business consistent with past practice;

(x)            Books and Records.  Since September 10, 2004, the books and records of the Borrower, including, without limitation, its stock record books and minute books, are complete and correct in all material respects and accurately and fairly reflect all meetings and other corporate actions of the Borrower’s stockholders and its Board of Directors and committees thereof and all material information relating to its business, the nature, acquisition, maintenance, location and character of its assets, and the nature of all transactions giving rise to its obligations or accounts receivable;

(y)           Related Party Transactions.  Except as disclosed in the Borrower’s public SEC filings, 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 the Borrower or its Subsidiaries is with or for the direct benefit of (i) any party owning, or formerly owning, beneficially or of record, directly or indirectly, in excess of five per cent (5%) of the outstanding capital stock of the Borrower, (ii) any director, officer or similar representative of the 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 Borrower’s business and to the actual knowledge of the 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 the Borrower or has done business with the 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 the Borrower;

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(z)            Securities Law Matters.  Except as disclosed in the Borrower’s public SEC filings, since January 1, 2005, the Borrower has filed in a timely manner all reports, registration statements, proxy statements and other materials, together with any amendments required to be made with respect thereto (the “Public Filings”), that were required to be filed with (i) the SEC under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended, and (ii) any applicable state securities authorities (the “Public Filing Rules”). The Public Filings complied as to form in all material respects with the Public Filing Rules as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that information contained in any such document has been revised or superseded by a later filed Public Filing.  The Borrower is in compliance in all material respects with the applicable requirements of the Public Filing Rules, as amended, and the rules and regulations thereunder.  The issuance of any shares of Common Stock to IFC upon conversion of the Conversion Amount will be exempt from registration under the Securities Act;

(aa)         No Anti-Dilution Rights.  The transactions contemplated hereby will not trigger any anti-dilution provisions contained in any existing agreements; and

(bb)         No Material Omissions.  Neither this Agreement nor any schedule, exhibit or certificate of the Borrower made or delivered pursuant to this Agreement contains or will contain any untrue statement of fact, or omits or will omit to state a material fact the absence of which makes such representation, warranty or other statement of the Borrower misleading.

Section 3.02.  IFC Reliance.  The Borrower acknowledges that it makes the representations and warranties in Section 3.01 (Representations and Warranties) with the intention of inducing IFC to enter into this Agreement and that IFC enters into this Agreement on the basis of, and in full reliance on, each of such representations and warranties.

ARTICLE IV

Conditions of Disbursement

Section 4.01.  Conditions of Disbursement.  The obligation of IFC to make the Disbursement is subject to the fulfillment prior to or concurrently with the making of the Disbursement of the following conditions:

(a)           Transaction Documents.  All of the Transaction Documents, each in form and substance satisfactory to IFC, have been entered into by all parties to them and have become (or, as the case may be, remain) unconditional and fully effective in accordance with their respective terms (except for this Agreement having become unconditional and fully effective, if that is a condition of any of those agreements), and IFC has received a copy of each of those agreements to which it is not a party;

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(b)           Charter Amendments.  The Borrower has certified to IFC that no amendment has been made to the Borrower’s Charter since the effective date of October 11, 2007, or if any such amendment was made, IFC has received a copy of the Borrower’s amended Charter and determined, in its reasonable judgment, that it is not inconsistent with the provisions of any Transaction Document and does not have or may not reasonably be expected to have a Material Adverse Effect;

(c)           Authorizations.  The Borrower has obtained, and provided to IFC copies of, all Authorizations listed in Section (1) and Section (2) of Annex A, and such other Authorizations not listed in those Sections that may become necessary for:

(i)                                     the C Loan;

(ii)                                  the business of the Borrower as it is presently carried on and is contemplated to be carried on;

(iii)                               the Project;

(iv)                              the due execution, delivery, validity and enforceability of, and performance by the Borrower of its obligations under, this Agreement and the other Transaction Documents, and any other documents necessary or desirable to the implementation of any of those agreements or documents; and

(v)                                 the remittance to IFC or its assigns in Dollars of all monies payable by the Borrower with respect to the Transaction Documents;

and all those Authorizations are in full force and effect;

(d)           Legal Opinions.  IFC has received a legal opinion of ▇▇▇▇▇ and ▇▇▇▇▇ LLP covering the matters set forth in Annex D and such other matters relating to the transactions contemplated by this Agreement as IFC may reasonably request, in form and substance satisfactory to IFC;

(e)           [Intentionally Omitted];

(f)            Insurance.  IFC has received copies of all insurance policies required to be obtained pursuant to Section 5.04 (Insurance) and Annex B, and a certification of the Borrower’s insurers or insurance agents confirming that such policies are in full force and effect and all premiums then due and payable under those policies have been paid;

(g)           Fees.   IFC has received the fees which Section 2.08 (Fees) requires to be paid before the date of the Disbursement;

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(h)           Legal Fees and Expenses.   IFC has received the reimbursement of all reasonable invoiced fees and expenses of IFC’s counsel as provided in Section 2.15 (b)(ii) or confirmation that those fees and expenses have been paid directly to the counsel;

(i)            [Intentionally Omitted];

(j)            Incumbency. IFC has received a Certificate of Incumbency and Authority;

(k)           Appointment of Agent. The Borrower has delivered to IFC evidence, substantially in the form of Exhibit D, of appointment of an agent for service of process pursuant to Section 8.05 (Applicable Law and Jurisdiction);

(l)            Environmental Matters.  (i) the Borrower has completed an S&EA and delivered to IFC the Action Plan, each in form and substance acceptable to IFC, (ii) the Borrower and IFC have agreed on the form of Annual Monitoring Report, and (iii) the Borrower is 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;

(m)          No Default.  No Event of Default and no Potential Event of Default has occurred and is continuing;

(n)           Use of Proceeds.  The proceeds of the Disbursement:

(i)                                     are, at the date of the request, needed by the Borrower for the purpose of the Project, or will be needed for that purpose within five (5) months of that date; and

(ii)                                  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;

(o)           No Material Adverse Effect.  Since the date of this Agreement nothing has occurred which has or could reasonably be expected to have a Material Adverse Effect;

(p)           No Material Loss or Liability.   Since the date of this Agreement the Borrower and its Subsidiaries have not incurred any loss or liability (except such liabilities as may be incurred in accordance with Section 5.02 (Negative Covenants)) which could reasonably be expected to have a Material Adverse Effect;

(q)           Representations and Warranties. The representations and warranties made in Article III are true and correct in all material respects on and as of the date of the Disbursement with the same effect as if those representations and warranties had been made on and as of the date of the Disbursement;

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(r)            No Violations.  After giving effect to the Disbursement, the Borrower would not be in violation of:

(i)                                     its Charter;

(ii)                                  any provision contained in any document to which the Borrower is a party (including this Agreement) or by which the Borrower is bound; or

(iii)                               any law, rule, regulation, Authorization or agreement or other document binding on the Borrower directly or indirectly limiting or otherwise restricting the Borrower’s borrowing power or authority or its ability to borrow; and

(s)           Financial Ratios.  Without limiting the generality of Section 4.02 (r), after taking into account the amount of the Disbursement and any other Long-term Debt incurred by the Borrower and its Subsidiaries, on a Consolidated Basis, and of any amounts of Tangible Net Worth paid into the Borrower and its Subsidiaries, on a Consolidated Basis, after the date of the latest quarterly report (Form 10-Q) of the Borrower delivered to IFC pursuant to Section 5.03 (a) (Reporting Requirements), the Balance Sheet Liabilities to Tangible Net Worth Ratio would not exceed 70:30.

Section 4.02.  Borrower’s Certification.  The Borrower shall deliver to IFC, with respect to the request for Disbursement, certifications, in the form included in Exhibit B, relating to the conditions specified in Section 4.01 (Conditions of Disbursement).

Section 4.03.  Conditions for IFC Benefit.  The conditions in Section 4.01 and Section 4.02 are for the benefit of IFC and may be waived only by IFC in its sole discretion.

ARTICLE V

Particular Covenants

Section 5.01.  Affirmative Covenants.  Unless IFC otherwise agrees, the Borrower shall:

(a)           Corporate Existence; Conduct of Business.   Maintain its corporate existence, comply with its Charter, and implement the Project and conduct its business with due diligence and efficiency and in accordance with sound industry, financial and business practices;

(b)           Use of Proceeds.  Cause the proceeds of the C Loan to be applied exclusively to the direct and indirect expenditures of the Project;

(c)           Compliance with Laws; Taxes.

(i)                                     Conduct its business in compliance, in all material respects, with all applicable requirements of law; and

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(ii)                                  Subject to lawful extensions of time, file by the date due all returns, reports and filings in respect of Taxes required to be filed by it and pay, when due, all Taxes due and payable by it;

(d)           Accounting and Financial Management.  Promptly install and maintain an accounting and control system, management information system and books of account and other records, which together adequately present fairly the consolidated financial condition of the Borrower and the consolidated results of its operations in conformity with the Accounting Standards;

(e)           Auditors.   Appoint and maintain at all times a firm of internationally recognized independent public accountants acceptable to IFC as auditors of the Borrower;

(f)            Access.  Upon IFC’s request, and with five (5) Business Days prior notice to the Borrower, permit representatives of IFC and the CAO (including IFC’s consultants) during normal office hours, to:

(i)                                     visit any of the sites and premises where the business of the Borrower or its Subsidiaries is conducted;

(ii)                                  inspect any of the Borrower’s or its Subsidiaries’ sites, facilities, premises and equipment;

(iii)                               have access to the Borrower’s or its Subsidiaries’ books of account and all records; and

(iv)                              have access to those employees, agents, contractors and subcontractors of the Borrower or its Subsidiaries who have or may have knowledge of matters with respect to which IFC seeks information;

at the Borrower’s reasonable expense and no more than twice annually (in the case of IFC and its representatives) and at IFC’s expense (in the case of the CAO); provided that (x) no such prior notice shall be necessary if an Event of Default or Potential Event of Default is continuing or if special circumstances so require and (y) in the case of the CAO, such access shall be for the purpose of carrying out the CAO’s Role;

(g)           Environmental Matters.  (Through its employees, agents, contractors and subcontractors), ensure that the design, construction, operation, maintenance, management and monitoring of the Project’s sites, equipment, operations and facilities are undertaken in compliance with (i) the Action Plan, (ii) the Performance Standards and (iii) the ESRS;

(h)           Review of Annual Monitoring Report.  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 changes to the Borrower’s business or operations, or in light of environmental or social

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risks identified by the Borrower’s S&E Management System, and revise the form as agreed with IFC;

(i)            S&E Management System.  Use all reasonable efforts to ensure the continuing 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;

(j)            Block Z-1 License; Authorizations.

(i)                                     Obtain and maintain in force (and where appropriate, renew in a timely manner) (i) the Block Z-1 License and (ii) all Authorizations, including without limitation the Authorizations specified in Annex A, which are necessary for the implementation of the Project, the carrying out of the Borrower’s business and operations generally and the compliance by the Borrower with all its obligations under the Transaction Documents; and

(ii)                                  comply with all the conditions and restrictions contained in, or imposed on the Borrower by, the Block Z-1 License and those Authorizations;

unless in the case of the Authorizations, a failure to do so could not reasonably be expected to have a Material Adverse Effect;

(k)           Financial Ratios.  Maintain a Balance Sheet Liabilities to Tangible Net Worth Ratio of no greater than 70:30;

(l)            Public Disclosures.  Publicly disclose on an annual basis, all material payments (such as taxes, royalties, profit shares) made in the previous year to the local and/national governments of the Country and the Republic of Ecuador under the applicable upstream license contracts; and

(m)          Further Assurances.  From time to time, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such further instruments as may reasonably be requested by IFC to enable the Borrower and its Subsidiaries to comply with their obligations under the Transaction Documents.

Section 5.02.  Negative Covenants.  Unless IFC otherwise agrees, the Borrower shall not:

(a)           Distributions.  Declare or pay any dividend or make any cash distribution on its capital stock (other than dividends or distributions payable in Common Stock), or purchase, redeem or otherwise acquire any stock of the Borrower or any option over them or make a payment under any subordinated Financial Debt (including shareholder loans) unless:

(i)                                     in case of dividends, the proposed payment or distribution is out of retained earnings or related to a Corporate Transaction; provided always that the retained earnings out of which any of the payments or distributions

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referred to in this paragraph (i) may be made should in no event include any amount resulting from the revaluation of any of the Borrower’s assets;

(ii)                                  before or after giving effect to any such action, the Balance Sheet Liabilities to Tangible Net Worth Ratio is no greater than 70:30;

(iii)                               no Event of Default or Potential Event of Default has occurred and is continuing or will occur after giving effect to any such action; and

(iv)                              no earlier than sixty (60) days nor later than thirty (30) days prior to doing so, the Borrower certifies to each of the matters referred to in Section 5.02 (a) (i)-(iii) to IFC in writing, in the form attached as Exhibit E;

(b)           Permitted Liens.  Create or permit to exist any Lien on any property, revenues or other assets, present or future, of the Borrower or any Subsidiary, except for any Lien:

(i)                                     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:

(A)                              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 Borrower or any Subsidiary; and

(B)                                the Borrower has set aside adequate reserves sufficient to promptly pay in full any amounts that the Borrower may be ordered to pay on final determination of any such proceedings;

(ii)                                  created in favor of IFC in connection with any loan (other than the C Loan) from IFC to the Borrower or any Subsidiary pursuant to the proposed financing arrangements described under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity, Capital Resources and Capital Expenditures” in the Borrower’s quarterly report on Form 10-Q for the period ended September 30, 2007 (the “IFC Senior Loan Financing”);

(iii)                               created in favor of any lender (other than IFC) in connection with the refinancing of all or any portion of the IFC Senior Loan Financing; provided, however, that (x) such indebtedness of the Borrower or any Subsidiary to such lender shall be in an amount not to exceed the principal amount of the IFC Senior Loan Financing so refinanced (including accrued interest from the last scheduled payment of interest on such indebtedness,

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fees, premium (if applicable) and other amounts and expenses related to such refinancing), (y) the average life shall not be shorter than that of the IFC Senior Loan Financing being refinanced (as calculated based on the principal amounts outstanding at the time of such refinancing), and (z) the final maturity of such indebtedness shall not be shorter than the earlier of the final maturity of the C Loan and the final maturity of the IFC Senior Loan Financing; and

(iv)                              created in favor of any lender (other than IFC) in connection with a senior debt financing incurred in the principal amount not to exceed one hundred fifty million Dollars ($150,000,000) and for the same purposes as the IFC Senior Loan Financing; provided, however, that such senior debt financing is a customary borrowing base financing for the oil and gas industry, whereby the borrowing base is linked to an independently certified reserve report;

(c)           Arm’s Length Transactions.   Enter into any transaction except in the ordinary course of business on the basis of arm’s-length arrangements (including, without limitation, transactions whereby the Borrower or any Subsidiary might pay more than the ordinary commercial price for any purchase or might receive less than the full ex-works commercial price (subject to normal trade discounts) for its products);

(d)           Fundamental Changes.  Change:

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

(ii)                                  its Financial Year; or

(iii)                               without the prior written consent of IFC which shall not be unreasonably withheld, the nature or scope of the Project or change the nature of its business or operations;

(e)           Merger, Consolidation, Etc.  (i) Except for Intra-Group Restructurings, consummate any Corporate Transaction without the prior written consent of IFC, which consent shall not be unreasonably withheld; provided, that (i) IFC shall provide its consent or non-consent to the Borrower in writing on or before ten (10) Business Days after receipt of written request for consent from the Borrower (together with a description of the proposed Corporate Transaction in reasonable detail), and (ii) in the event IFC fails to so provide such consent or non-consent on or before the expiration of such ten (10) Business Day period, IFC’s consent shall be deemed to have been given to such proposed Corporate Transaction; and provided, further, that in the event IFC does not consent (or is not deemed to so consent) to such proposed Corporate Transaction, the Borrower shall, subject to Section 5.02 (e)(ii), be entitled to prepay the C Loan, together with payment of the Prepayment Premium and all other amounts payable in accordance with Section 2.07 (b) (Prepayment); and

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(ii)           In the event the Borrower prepays the C Loan as described in clause (i) above, the Borrower does not waive any claim it may have that IFC’s consent to the proposed Corporate Transaction was unreasonably withheld, and shall be entitled to file any such claim with a court of competent jurisdiction described in Section 8.05 (b) (Applicable Law and Jurisdiction) within a period of six (6) months following consummation of such Corporate Transaction.  In the event the Borrower obtains a judgment in its favor that such consent was unreasonably withheld, the parties agree that the quantum of damages for such claim shall be the amount of the Prepayment Premium paid to IFC.  IFC shall not be liable for any consequential, indirect, special or punitive damages in connection therewith; the Borrower shall be entitled to make application to the court, however, for incidental expenses as permitted under New York law, including pre-judgment interest and legal fees.  Nothing herein shall be deemed a waiver by IFC of its immunities under its Articles of Agreement or applicable law;

(f)            Use of Proceeds.  Use the proceeds of the Disbursement in the territories of any country that is not a member of the World Bank or for reimbursements of expenditures in those territories or for goods produced in or services supplied from any such country;

(g)           Amendment of Action Plan.  The Borrower shall not amend the Action Plan in any material respect without the prior written consent of IFC; or

(h)           Sanctionable Practices.  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.  The Borrower further covenants that should IFC notify the Borrower of its concerns that there has been a violation of the provisions of this Section or of Section 3.01 (n) (Representations and Warranties), it shall cooperate in good faith with IFC and its representatives in determining whether such a violation has occurred, and shall respond promptly and in reasonable detail to any notice from IFC, and shall furnish documentary support for such response upon IFC’s request.

Section 5.03.  Reporting Requirements.  Unless IFC otherwise agrees, the Borrower shall:

(a)           Quarterly Requirements.  As soon as available but in any event within forty-five (45) days after the end of each quarter of each Financial Year, deliver to IFC:

(i)                                     a copy of the Borrower’s quarterly report (Form 10-Q) as filed with the SEC; and

(ii)                                  a report (in the form pre-agreed by IFC), signed by the Borrower’s chief financial officer, concerning compliance with the financial covenants in this Agreement (including a clear description of the methodology used in the respective calculations);

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(b)           Annual Requirements.  As soon as available but in any event within ninety (90) days after the end of each Financial Year, deliver to IFC:

(i)                                     a copy of the Borrower’s annual report (Form 10-K) as filed with the SEC;

(ii)                                  a report (in the form pre-agreed by IFC), signed by the Borrower’s 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);

(iii)                               an updated certification of the reserves in the Corvina field, and, if applicable, any other field reserves in Block Z-1, prepared in accordance with SEC regulations by the Independent Engineer;

(iv)                              a capital and operating budget for the next Financial Year; and

(v)                                 a consolidating statement by the Borrower of all transactions between the Borrower and each of its Affiliates, if any, during that Financial Year, and a certification by the Borrower’s chief financial officer that those transactions were on the basis of arm’s-length arrangements;

(c)           Annual Monitoring Report.  Within sixty (60) days after the end of each Financial Year, deliver to IFC the corresponding Annual Monitoring Report in a form consistent with the requirements of this Agreement confirming compliance with the Action Plan, the social and environmental covenants set forth in Sections 5.01 and 5.02 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; provided that the Borrower may supplement any Annual Monitoring Report with such information as may be useful to enhance its clarity and/or to better illustrate the Borrower’s performance over time (e.g., charts, graphs);

(d)           Notice of Accidents, Etc.  Within five (5) Business Days after its occurrence, notify IFC 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 IFC informed of the on-going implementation of those measures and plans;

(e)           Shareholder Matters.  Give notice to IFC, concurrently with the Borrower’s notification to its stockholders, of any meeting of its stockholders, such notice to include the agenda of the meeting; and, as soon as available, deliver to IFC copies of all notices, reports and other communications of the Borrower to its stockholders, whether any such communication has been made on an individual basis or by way of publication in a newspaper or other communication medium;

(f)            Changes to Project; Material Adverse Effect.  Promptly notify IFC of any proposed change in the nature or scope of the Project or the business or operations of the

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Borrower and of any event or condition that has or may reasonably be expected to have a Material Adverse Effect;

(g)           Litigation, Etc.  Promptly upon becoming aware of any litigation, arbitration or administrative proceedings before any Authority or arbitral body which has or may reasonably be expected to have a Material Adverse Effect, notify IFC 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;

(h)           Default.  Promptly upon the occurrence of an Event of Default or Potential Event of Default, notify IFC 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; and

(i)            Other Information.  Promptly provide to IFC such other information as IFC from time to time requests about the Borrower, its Subsidiaries, their respective assets and the Project.

Section 5.04.  Insurance.  (a) The Borrower shall cause its operations in the Country to effect and maintain the insurance coverage specified in Annex B at all times, under forms of policies and with insurers and reinsurers acceptable to IFC.  For the avoidance of doubt, the Borrower’s obligations under this Section 5.04 shall survive a conversion of the Conversion Amount into Common Stock pursuant to Article VII (Conversion of the C Loan).

(b)           All policies of liability insurance required to be maintained in accordance with Annex B shall be endorsed to name IFC and its officers and employees as additional insureds.

ARTICLE VI

Events of Default

Section 6.01.  Acceleration after Default.  If any Event of Default occurs and is continuing (whether it is voluntary or involuntary, or results from operation of law or otherwise), IFC may, by notice to the Borrower, require the Borrower to repay the C Loan or such part of the C Loan as is specified in that notice.  On receipt of any such notice, the Borrower shall immediately repay the C Loan (or that part of the C Loan specified in that notice) and pay all interest accrued on it, the prepayment premium specified in Section 2.07 on the amount of the C Loan whose payment is accelerated and any other amounts then payable under this Agreement. The Borrower waives any right it might have to further notice, presentment, demand or protest with respect to that demand for immediate payment.

Section 6.02.  Events of Default.  It shall be an Event of Default if:

(a)           Failure to Pay Principal or Interest.   The Borrower fails to pay when due any part of the principal of, or interest on, the C Loan and such failure continues for a period of three (3) Business Days;

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(b)           Failure to Pay Other IFC Loans.  The Borrower fails to pay when due any part of the principal of, or interest on, any loan from IFC to the Borrower other than the C Loan and any such failure continues for the relevant grace period allowed for in the agreement providing for that loan;

(c)           Failure to Comply with Obligations.   The Borrower (or, in the case of the Block Z-1 License, any Subsidiary) fails to comply with any of its obligations under this Agreement or any other Transaction Document or any other agreement between the Borrower and IFC (other than for the payment of the principal of, or interest on, the C Loan or any other loan from IFC to the Borrower), and any such failure continues for a period of thirty (30) days after the earlier of (x) the date on which IFC notifies the Borrower of that failure and (y) the date on which the Borrower should reasonably have become aware of that failure; provided, however, that such thirty (30) day cure period shall be extended to ninety (90) days in aggregate if not curable within thirty (30) days and the Borrower is pursuing a cure in good faith;

(d)           Failure by Other Parties to Comply with Obligations.  Any party (other than IFC or the Borrower) to a Transaction Document (excluding the Co-Sale Agreement) fails to observe or perform any of its obligations under that Transaction Document, and such failure continues for a period of thirty (30) days after the earlier of (i) the date on which IFC notifies the Borrower of that failure and (y) the date on which the Borrower should reasonably have become aware of that failure; provided, however, that such thirty (30) day period shall be extended to one hundred twenty (120) days in aggregate if such failure is by a party not an Affiliate of the Borrower, is not curable within thirty (30) days and the Borrower is pursuing a cure in good faith;

(e)           Misrepresentation.  Any representation or warranty made in Article III or in connection with the execution of, or any request (including a request for Disbursement) under, this Agreement or any other Financing Document is found to be incorrect, except if such incorrectness could not reasonably be expected to result in a Material Adverse Effect;

(f)            Expropriation, Nationalization, Etc.  Any Authority condemns, nationalizes, seizes, or otherwise expropriates all or any substantial part of the property or other assets of the Borrower or any Subsidiary or of its respective capital stock, or assumes custody or control of that property or other assets or of the business or operations of the Borrower or any Subsidiary or of its respective capital stock, or takes any action for the dissolution or disestablishment of the Borrower or any Subsidiary or any action that would prevent the Borrower or any Subsidiary or its respective officers from carrying on all or a substantial part of its business or operations;

(g)           Involuntary Proceedings.  A decree or order by a court is entered against the Borrower or any Subsidiary:

(i)                                     adjudging the Borrower or such Subsidiary bankrupt or insolvent;

(ii)                                  approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of, or with respect to, the Borrower or such Subsidiary under any applicable law;

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(iii)                               appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower or such Subsidiary or of any substantial part of its respective property or other assets; or

(iv)                              ordering the winding up or liquidation of its affairs;

or any petition is filed seeking any of the above and is not dismissed within sixty (60) days;

(h)           Voluntary Proceedings.  The Borrower or any Subsidiary:

(i)                                     requests a moratorium or suspension of payment of Liabilities from any court;

(ii)                                  institutes proceedings or takes any form of corporate action to be liquidated, adjudicated bankrupt or insolvent;

(iii)                               consents to the institution of bankruptcy or insolvency proceedings against it;

(iv)                              files a petition or answer or consent seeking reorganization or relief under any applicable law, or consents to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower or such Subsidiary or of any substantial part of its respective property or other assets;

(v)                                 makes a general assignment for the benefit of creditors; or

(vi)                              admits in writing its inability to pay its Liabilities generally as they become due or otherwise becomes insolvent;

(i)            Attachment.  An attachment or analogous process is levied or enforced upon or issued against any of the assets of the Borrower for an amount in excess of the equivalent of two hundred fifty thousand Dollars ($250,000) and is not discharged within thirty (30) days;

(j)            Analogous Events to Bankruptcy.  Any other event occurs which under any applicable law would have an effect analogous to any of those events listed in Section 6.02 (g), Section 6.02(h) and Section 6.02 (i);

(k)           Cross-Default.  The Borrower or any Subsidiary fails to (i) make any payment in respect of any of its Liabilities (other than the C Loan or any other loan from IFC to the Borrower or such Subsidiary) in excess of the equivalent of three million Dollars ($3,000,000) or (ii) perform any of its obligations under any agreement pursuant to which there is outstanding any such Liability (as provided in clause (i) above), 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;

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(l)            Failure to Maintain Authorizations.  Any Authorization necessary for the Borrower or any Subsidiary to perform and observe its obligations under any Transaction Document (excluding the Co-Sale Agreement), or to carry out the Project, is not obtained when required or is rescinded or terminated, lapses or otherwise ceases to be in full force and effect, including with respect to the remittance to IFC or its assignees, in the Loan Currency, of any amounts payable under any Transaction Document (excluding the Co-Sale Agreement), unless such failure could not reasonably be expected to have a Material Adverse Effect, and any such failure continues for a period of thirty (30) days after the earlier of (x) the date on which IFC notifies the Borrower of that failure and (y) the date on which the Borrower should reasonably have become aware of that failure; provided, however, that such thirty (30) day cure period shall be extended to ninety (90) days in aggregate if not curable within thirty (30) days and the Borrower is pursuing a cure in good faith;

(m)          Revocation, Etc., of Transaction Documents.  Any Transaction Document (excluding the Co-Sale Agreement) or any of its material provisions:

(i)                                     is revoked, terminated or ceases to be in full force and effect without, in each case, the prior consent of IFC, and that event, if capable of being remedied, is not remedied to the satisfaction of IFC within thirty (30) days of the earlier of (x) the date on which IFC notifies the Borrower of that event and (y) the date on which the Borrower should reasonably have become aware of that event; provided, however, that such thirty (30) day cure period shall be extended to ninety (90) days in aggregate if not curable within thirty (30) days and the Borrower is pursuing a cure in good faith;

(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 by any Person and such repudiation or challenge is not withdrawn within thirty (30) days of IFC’s notice to the Borrower requiring that withdrawal; provided, that (A) in the case of the Block Z-1 License, such thirty (30) day period shall be extended to one hundred twenty (120) days in aggregate if such repudiation or challenge is not withdrawn within thirty (30) days and the Borrower is diligently contesting such repudiation or challenge, and (B) no such notice shall be required or, as the case may be, the notice period shall terminate if and when such repudiation or challenge becomes effective;

(n)           Unsatisfied Judgments.  A judgment or judgments, decrees, orders or arbitral awards for the payment of money the execution of which is not effectively stayed or satisfied within sixty (60) or more consecutive days after it has become final and non-appealable, is entered against the Borrower or any Subsidiary in excess of two hundred fifty thousand Dollars ($250,000) in the aggregate or the equivalent thereof in other currencies; or

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(o)           Project Abandonment.  The Borrower abandons the Project.

Section 6.03.  Bankruptcy.  If any event described in Section 6.02 (g) (Events of Default) occurs (or any analogous event under Section 6.02 (j) (Events of Default)), the C Loan, all interest accrued on it and any other amounts payable under this Agreement will become immediately due and payable without any presentment, demand, protest or notice of any kind, all of which the Borrower waives.

ARTICLE VII

Conversion of the C Loan

Section 7.01.  Conversion by IFC or the Borrower.  (a) Either IFC or the Borrower may, at its sole discretion, convert the Conversion Amount into Common Stock at any time during the Conversion Period and in the manner provided herein by delivering a Conversion Notice to the other party; provided, however, that the Borrower shall be entitled to deliver a Conversion Notice only if the Current Market Price exceeds one hundred and seventy five per cent (175%) of the Conversion Price.

(b)           The number of shares to be issued and delivered by the Borrower to IFC upon conversion of the Conversion Amount into Common Stock shall be equal to the result of (x) the Conversion Amount divided by (y) the Conversion Price.  The Borrower shall deliver to IFC a check for cash in lieu of any fractional share in accordance with Section 7.02 (c) (Conversion Procedure).

Section 7.02.  Conversion Procedure.  (a) As promptly as practicable after receipt by the Borrower or IFC, as the case may be, of a Conversion Notice, the Borrower shall take all such actions as may be necessary or desirable in accordance with all applicable stock exchange or other legal requirements to give effect to the conversion of the Conversion Amount into Common Stock, including, without limitation:

(i)                                     obtaining all Authorizations and corporate approvals that are required in connection with such conversion;

(ii)                                  causing any amendment to the Charter in connection with such conversion to be filed with all relevant Authorities; and

(iii)                               taking all such other steps as may be necessary for any increase in the authorized capital stock of the Borrower necessary for giving effect to such conversion to be duly registered on the books of the Borrower and with all relevant Authorities;

all such actions to be made prior to and effective on and as of the Conversion Date.

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(b)           As soon as practicable, but in any event not later than forty-five (45) days after the Conversion Date, the Borrower shall deliver to IFC (i) the certificates, each registered in the name of IFC, for the number of full shares of Common Stock issued upon the conversion, and (ii) a check for any fractional share in accordance with Section 7.02 (c).  IFC shall be treated as a stockholder of record with respect to such shares of Common Stock on and after the Conversion Date.

(c)           The Borrower shall not issue a fractional share of Common Stock upon conver­sion of the Conversion Amount.  Instead, the Borrower shall deliver a check for an amount in Dollars equal to the current market value of the fractional share.  The current market value of a fraction of a share shall be a product of (x) the Conversion Price multiplied by (y) the fraction (rounded to the nearest cent).

(d)           The delivery by the Borrower of the fixed number of shares of Common Stock pursuant to this Section 7.02 shall be deemed to satisfy the Borrower’s obligation to pay the principal amount of the C Loan, all accrued interest thereon and all other amounts accrued under this Agreement that have not been paid.  Such Common Stock shall be treated as issued first in payment of accrued interest, second in payment of principal of the C Loan and then in payment of all other unpaid amounts.

Section 7.03.  Taxes on Conversion.  The Borrower shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion.

Section 7.04.  Borrower to Reserve Common Stock.  (a) The Borrower shall at all times reserve out of its authorized but unissued Common Stock or its Common Stock held in treasury enough shares of Common Stock to permit the conversion of the Conversion Amount.

(b)           All shares of Common Stock issued upon conversion of the Conversion Amount shall be fully paid, non-assessable, freely transferable and free of any Liens and preemptive or other similar rights.

(c)           The Borrower shall comply with all securities laws regulating the offer and delivery of shares of Common Stock upon conversion and shall list such shares on the American Stock Exchange.

Section 7.05.  Adjustment for Change in Capital Stock.  (a) If the Borrower:

(i)                                     pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock;

(ii)                                  subdivides its outstanding shares of Common Stock into a greater number of shares;

(iii)                               combines its outstanding shares of Common Stock into a smaller number of shares;

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(iv)                              makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or

(v)                                 issues by reclassification of its Common Stock any shares of its capital stock;

then the conversion privilege and the Conversion Price in effect immediately prior to such action shall be proportionately adjusted so that IFC may receive the aggregate number and kind of shares of capital stock of the Borrower that IFC would have owned immediately following such action if the Conversion Amount had converted immediately prior to such action.

(b)           Each adjustment contemplated by Section 7.05 (a) shall become effective immedi­ately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification.

(c)           If after such adjustment IFC may receive shares of two or more classes of capital stock of the Borrower, the Board of Directors of the Borrower, acting in good faith, shall determine the allocation of the adjusted Conversion Price among the classes of capital stock.  After such allocation, the conversion privilege and the Conversion Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Article VII.  The term “Common Stock” shall thereafter apply to each class of capital stock and the Borrower shall enter into an amendment hereto, as may be necessary to reflect such conversion privilege and Conversion Price.

(d)           The adjustment contemplated by this Section 7.05 shall be made successively whenever any of the events listed above shall occur.

Section 7.06.  Adjustment for Rights Issue.  (a) If the Borrower distributes any rights, options or warrants to all holders of its Common Stock entitling them for a period expiring within sixty (60) days after the record date men­tioned below to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price on that record date, the Conversion Price shall be adjusted in accordance with the following formula:

where:

C’ =          the adjusted Conversion Price

C =              the current Conversion Price

O =             the number of shares of Common Stock outstanding on the record date

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N =             the number of additional shares of Common Stock subject to such rights, options or warrants

P =               the offering price per share of the additional shares

M =          the Current Market Price on the record date

(b)           The adjustment contemplated by Section 7.06 (a) shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants.  If at the end of the period during which such rights, options or warrants are exercis­able, not all rights, options or warrants shall have been exercised, the Conversion Price shall immediately be readjusted to what it would have been if “N” in the above formula had been the number of shares actually issued.

Section 7.07.  Adjustment for Other Distributions.  (a) If the Borrower distributes to all holders of its Common Stock any of its assets (including, but not limited to, cash), debt securities or other securities or any rights, options or warrants to purchase assets, debt securities or other securities of the Borrower, the Conversion Price shall be adjusted in accordance with the following formula:

where: