Document:

ex1009form10.htm

LOAN AGREEMENT

This Loan Agreement (the “Loan Agreement”) is made as of February 10, 2012, by and between DCO Energy, LLC, a New Jersey limited liability company with offices at 5429 Harding Highway, Building 500, Mays Landing, New Jersey 08330 (the “Lender”) and Ocean Thermal Energy Corporation, a Delaware Corporation with offices at 800 South Queen Street, Lancaster, Pennsylvania 17603 (the “Borrower”).

WITNESSETH:

WHEREAS, the Borrower desires to obtain certain credit facilities, as set forth in this Loan Agreement, and the Lender is willing to provide such credit facilities on the terms and conditions set forth herein;

NOW, THEREFORE, the Lender and the Borrower, intending to be legally bound, hereby agree as follows:

1.             The Loan. The Lender agrees, pursuant to the terms and conditions of this Loan Agreement and the other Loan Documents (as defined below), to make a loan to the Borrower in the original principal amount of One Million Dollars ($1,000,000) (the “Loan”). The Loan shall be evidenced by a Note (the “Note”) and shall be made in accordance with and subject to the terms and conditions of this Loan Agreement, the Note, and other Loan Documents.

2.             The Loan Documents. The following documents and materials (together with this Loan Agreement and any other accessory documents executed in connection herewith, such documents and materials, as they may be amended, restated, renewed and extended, are collectively referred to herein as the “Loan Documents”) have been or will be executed in connection with the Loan:

(a)           Note;

(b)           Security Agreement, of even date herewith, between Lender and Borrower (the “Security Agreement”);

(c)           A warrant, of even date herewith, granting to Lender, as additional consideration for making the Loan to Borrower, the right to purchase 3,295,761 shares of the Borrower’s common stock at a price of $0.50 per share.

3.             Interest Rate. The Loan shall bear interest as set forth in the Note.

4.             Repayment. Repayment of the Loan shall be made as set forth in the Note, and pre-payment shall be permitted as therein specified.

5.             Use of Proceeds. The proceeds of the Loan shall be utilized by Borrower for fifty percent (50%) of the pre-development work and studies relative to the Baha Mar Project with the balance to be used for other development work and additional projects. Borrower shall provide Lender with a commercially reasonable accounting of the use of the funds upon request.

6.             Collateral. The Loan will be secured by a first lien security interest in all assets of Borrower now owned or hereafter acquired as more specifically set forth in the Security Agreement.

 

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7.             Expenses and Fees. The Borrower and Lender each agree to pay their own expenses and fees of every nature related to their execution and carrying out of this Loan Agreement and the other Loan Documents.

8.             Representations and Warranties. The Borrower, in order to induce the Lender to make the Loan, makes the following representations, warranties, and promises:

(a)            Good Standing. The Borrower is a corporation, duly organized, validly existing and in good standing under the laws of the state of its incorporate, with powers adequate to own its properties, and to carry on its business as presently conducted by it.

(b)           Authority; Binding Agreement. The execution, delivery, and performance of the Loan Documents are within the corporate power of the Borrower, have been duly authorized by the Borrower, and are not in contravention of law or the terms of the Borrower’s Articles of Incorporation and By-Laws. The execution, delivery and performance of the Loan Documents does not and will not contravene any documents, agreements or undertakings to which the Borrower is a party or by which it is bound. No approval of any person, corporation, governmental body or other entity is a prerequisite to the execution, delivery, validity or enforceability and performance of the Loan Documents. When executed by the Borrower, the Loan Documents to which the Borrower is a party will constitute the legally binding obligations of the Borrower, enforceable in accordance with their terms except as the enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally.

(c)            Financial Information. Subject to any limitation stated therein or in connection therewith, all balance sheets, earning statements, accounts receivable lists and aging schedules and other financial data which have been or shall be furnished to the Lender by the Borrower to induce the Lender to enter into this Loan Agreement or otherwise in connection herewith, do or will fairly represent the financial condition of the Borrower in all material respects, are accurate, complete and correct in all material respects insofar as completeness may be necessary to give the Lender a true and accurate knowledge of the subject matter as of the date hereof. There are no material liabilities, direct or indirect, fixed or contingent, of the Borrower as of the date of such financial statements, which are not reflected therein or in the notes thereto. There has been no material adverse change in the financial condition or operations of the Borrower since the date of said financial statements or since the respective dates on which the Borrower furnished the Lender with other financial data or other representations about its financial condition.

(d)           Solvency. Any borrowings to be made by the Borrower under this Loan Agreement do not and will not render Borrower insolvent. The Borrower is not contemplating either the filing of a petition under any state or federal bankruptcy or insolvency laws, or the liquidation of all or a major portion of its property, and the Borrower has no knowledge or any reason to know of any person contemplating the filing of any such petition against it.

9.             Covenants. The Borrower agrees with the Lender that during the term of this Agreement and the other Loan Documents, and any extensions, replacements or renewals thereof (except as otherwise agreed by the Lender in writing):

(a)            Insurance. The Borrower shall maintain adequate fire and extended coverage insurance, with the Lender named as lender loss payee, as well as general liability, business interruption and other insurance policies as are customary. All such insurance:

(i)            Shall be issued in such amounts and by such companies as are satisfactory to the Lender; and

 

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(ii)           Shall contain provisions providing for thirty (30) days’ prior written notice to the Lender of any intended change or cancellation and providing that no such change or cancellation shall be effective as to the Lender in the absence of such notice.

(b)           Notice of Default; Litigation. The Borrower shall notify the Lender in writing immediately upon becoming aware of any default hereunder, or of any actions, suits, investigations, or proceedings at law, in equity or before any governmental authority that may have a material adverse effect on the Borrower, pending or threatened, against or affecting the Borrower or any collateral securing the Loan or involving the validity or enforceability of the Loan Documents or the priority of the liens created thereunder.

(c)            Financial Information. The Borrower shall furnish or cause to be furnished to the Lender: (i) on an annual basis, federal income tax returns of the Borrower and annual financial statements of the Borrower, compiled by certified public accountants, within one hundred twenty (120) days after the end of each fiscal year; and (ii) on a fiscal quarter basis, internally-prepared interim financial statements of the Borrower in a form satisfactory to Lender within thirty (30) days of the close of each fiscal quarter.

(d)           Expenses. The Borrower shall pay all costs and expenses (including, but not limited to, attorneys’ fees) incidental to the preservation and priority of the Lender’s liens and security interests under the Loan Documents and to the collection of all obligations pursuant to the Loan Documents.

(e)            Sale of Assets, etc. The Borrower shall not sell, lease, assign, transfer, or otherwise dispose of any of its now owned or hereafter acquired assets, expect: (1) inventory disposed of in the ordinary course of business; and (2) the sale or other disposition of assets no longer used or useful in the conduct of its business.

(f)            Mergers, etc. The Borrower shall not wind up, liquidated or dissolve, reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any person, or acquire all or substantially all of the assets or the business of any person.

(g)           Loans and Advances. The Borrower shall not make any additional loans or advances to any individual, firm, or corporation.

(h)           Further Assurances. Each Party shall execute such documents as the other Party may reasonably request relating to the Loan.

10.           Conditions Precedent. The obligation of the Lender to make the Loan is subject to the satisfaction by the Borrower of the following conditions precedent:

(a)           The Borrower’s representations and warranties as contained herein shall be accurate and complete as of the date of closing;

(b)           The Borrower shall not be in default under any of the covenants contained herein as of the date of closing;

(c)           The Borrower shall have executed and delivered all of the Loan Documents to which it is a party.

 

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11.           Events of Default; Acceleration; Remedies. The occurrence of any one or more of the following events shall constitute a default (an “Event of Default”) under this Agreement:

(a)            If any statement, representation or warranty made by the Borrower in the Loan Documents, in connection therewith or any financial statement, report, schedule, or certificate furnished to the Lender by the Borrower, any of its representatives, employees or accountants during the term of this Agreement shall prove to have been false or misleading when made, or subsequently becomes false or misleading, in any material respect;

(b)           Default by the Borrower in payment within five (5) days of the due date of any principal or interest or other amounts called for under the Loan Documents;

(c)           Default by the Borrower in the performance or observance of any of its respective obligations under the provisions, terms, conditions, warranties or covenants of the Loan Documents and such failure shall continue for a period of thirty (30) days or more following receipt of written notice thereof from the Lender;

(d)           The occurrence of an event of default not cured within any applicable remedy period, under any other obligation of the Borrower in an aggregate amount of Ten Thousand Dollars ($10,000) or more, for borrowed money or under any lease;

(e)           The dissolution, terminate of existence, merger or consolidation of the Borrower, or a sale of all or substantially all of the assets of the Borrower out of the ordinary course of business;

(f)           A change in the beneficial ownership of fifty percent (50%) or more (in the aggregate) of the issued and outstanding voting capital stock of the Borrower from the ownership on the date of this Loan Agreement, whether through transfer, issuance of stock or membership interest or otherwise;

(g)           The occurrence of an event of default not cured within any applicable remedy period, under any obligations of the Borrower to the Lender other than under the Loan Documents, whether created prior to, concurrent with, or subsequent to obligations arising out of the Loan Documents;

(h)           The Borrower shall: (i) apply for or consent to the appointment of a receiver, trustee or liquidator of any of its property, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization to take advantage of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it or he in any proceeding under any such law or (vi) offer or enter into any compromise, extension or arrangement seeking relief or extension of its debts;

(i)            In the event that proceedings shall be commenced or an order, judgment or decree shall be entered against the Borrower, without the application, approval or consent of the Borrower in or by any court of competent jurisdiction, relating to the bankruptcy, dissolution, liquidation, reorganization or the appointment of a receiver, trustee or liquidator of the Borrower of all or a substantial part of their or its assets, and such proceedings, order, judgment or decree shall continue undischarged or unstayed for a period of 90 days;

 

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(j)            A final and unappealable judgment for the payment of money in excess of Ten Thousand Dollars ($10,000) shall be rendered against the Borrower and the same shall remain undischarged for a period of 60 days, during which period of execution shall not be effectively stayed.

Upon the occurrence of any Event of Default, automatically upon an Event of Default under subsection (h) or (i) of this Section or otherwise at the election of the Lender, (i) all of the obligations of the Borrower to the Lender, under this Loan Agreement or the Loan Documents, will immediately become due and payable without further demand, notice or protest, all of which are hereby expressly waived; (ii) the Lender may proceed to protect and enforce its rights, at law, in equity, or otherwise, against the Borrower and may proceed to liquidate and realize upon any of its collateral in accordance with the rights of a mortgagee or a security party under the Uniform Commercial Code, any other applicable law, any Loan Document; and/or (iii) the Lender’s commitment to make further loans under this Agreement or any other agreement with the Borrower will immediately cease and terminate.

12.           General Provisions. The Lender and the Borrower agree as follows with respect to the Loan Documents:

(a)           Waivers:

(i)           The Borrower hereby waives, to the fullest extent permitted by law, presentment, notice, protest and all other demands and notices of any description and assent (1) to any extension of the time of payment or any other indulgence, (2) to any substitution, exchange or release of collateral, and (3) to the release of any other person primarily or secondarily liable for the obligations evidenced hereby.

(ii)           No delay or omission on the part of the Lender in exercising any right, privilege, or remedy hereunder shall operate as a waiver of such right, privilege, or remedy or of any other right, privilege, or remedy under the Loan Documents. No waiver of any right, privilege or remedy or any amendment to the Loan Documents shall be effective unless made in writing and signed by the Lender. A waiver on any one occasion shall not be construed as a bar to or waiver of any such right, privilege and/or remedy on any future occasion. No single or partial exercise of any power hereunder shall preclude other or future exercise thereof or the exercise of any other right. The acceptance by the Lender of any payment after any default under the Loan Documents shall not operate to extend the time of payment of any amount then remaining unpaid hereunder or constitute a waiver of any rights of the Lender hereof under the Loan Documents.

(b)           Binding Agreement. The Loan Documents shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, legal representatives, successors, and assigns.

(c)           Entire Agreement and Amendment. The Loan Documents constitute the entire agreement between the Lender and the Borrower with respect to the Loan and shall not be changed in any respect except by written instrument signed by the parties thereto.

(d)           Governing Law. The Loan Documents and all rights and obligations thereunder, including matters of construction, validity, and performance, shall be governed by the laws of the Commonwealth of Pennsylvania.

 

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(e)           Severability. If any term, condition, or provision of the Loan Documents or the application thereof to any person or circumstance shall, to any extent, be held invalid or unenforceable according to law, then the remaining terms, conditions, and provisions of the Loan Documents, or the application of any such invalid or unenforceable term, condition or provision to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby, and each term, condition, and provision of the Loan Documents shall be valid and enforced to the fullest extent permitted by law.

(f)           Notice. Any demand or notice required or permitted under the Loan Documents shall be effective if either: (i) hand-delivered to the addressee, or (ii) deposited in the mail, registered or certified, return receipt requested and postage prepaid, or delivered to a private express company addressed to the addressee: (A) at the address shown below, or (B) if such party has provided the other in writing with a change of address, at the last address so provided. Any notice or demand mailed as provided in this paragraph shall be deemed given and received on the earlier of: (i) the date received; (ii) or the date of delivery, refusal, or non-delivery as indicated on the return receipt, if sent by mail or private express as provided above.

	
Borrower:

	
Lender:

	
Ocean Thermal Energy Corporation

	
DCO Energy, LLC

	
Attention: Jeremy Feakins,

	
Attention: Frank DiCola,

	
Chairman & CEO

	
President & CEO

	
800 South Queen Street

	
5429 Harding Highway, Bldg. 500

	
Lancaster, PA 17603

	
Mays Landing, NJ 08330

	
Phone: 717-299-1344

	
Phone: 609-837-8010

	
E-mail: jeremy@otecorporation.com

	
Email: fdicola@dcoenergy.com

	  	  
	
With a copy to:

	
With copy to:

	
Ocean Thermal Energy Corporation

	
Chief Financial Officer, DCO Energy, LLC

	
Attention: Gerald Koenig, General Counsel

	
Attention: Michael Jingoli

	
8220 Crestwood Heights Drive, #1105

	
100 Lenox Drive, Suite 100

	
McLean VA 22102

	
Lawrenceville, NJ 08648

	
Phone: 703-725-4002

	
Phone: 609-896-3111

	
Email: gskoenig@aol.com

	
Email: mjingoli@jingoli.com

(g)           Conflict Among Loan Documents. In the event of any conflict between the terms, covenants, conditions and restrictions contained in the Loan Documents, the term, covenant and condition or restriction which grants the greater benefit upon the Lender shall control. The determination as to which term, covenant, condition, or restriction is the more beneficial shall be made by the Lender in its sole discretion.

(h)           Costs of Collection. The Borrower agrees to pay on demand all reasonable out-of-pocket costs of collection under the Loan Documents, including reasonable attorneys’ fees, whether or not any foreclosure or other action is instituted by the Lender in its discretion.

(i)             Set-Off, etc. As additional collateral, the Borrower grants (1) a security interest in, or pledges, assigns and delivers, to Lender, as appropriate, all deposits, credit and other property now or hereafter due from the Lender to the Borrower and (2) the right to set-off and apply ( and a security interest in said right), from time to time hereafter and without demand or notice of any nature, all, or any portion, of such deposits, credits and other property, against the indebtedness evidenced by any of the Notes, whether the other collateral, if any, is deemed adequate or not.

 

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(j)            Rights Cumulative. All rights and remedies of the Lender, whether granted herein or otherwise, shall be cumulative and may be exercised singularly or concurrently and the Lender shall have, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code of Pennsylvania. Except as otherwise provided by law, the Lender shall have no duty as to the collection or protection of the collateral or of any income thereon or as the preservation of any rights pertaining thereto beyond the safe custody thereof.

IN WITNESS WHEREOF, the Borrower and the Lender have executed this Loan Agreement as of the date first written above.

 

 

	 	
OCEAN THERMAL ENERGY CORPORATION

 

By: /s/ Stephen Oney

Name: Stephen Oney, PhD

Title: Director & Chief Science Officer

 

DCO ENERGY, LLC

 

By: /s/ Frank DiCola

Name: Frank DiCola

Title: President & CEO

 

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PROMISSORY NOTE

	
$1,000,000

	
February 10, 2012

FOR VALUE RECEIVED, Ocean Thermal Energy Corporation, a Delaware corporation with an address of 800 South Queen Street, Lancaster, PA 17603 (the “Borrower”), hereby promise to pay to the order of DCO Energy, LLC, a New Jersey limited liability company with offices at 5429 Harding Highway, Building 500, Mays Landing, New Jersey 08330 (the “Lender”), at 5429 Harding Highway, Building 500, Mays Landing, New Jersey 08330, or at any other place designated to the Borrower by the Lender in writing, the principal sum of One Million Dollars ($1,000,000), with interest as herein specified, and under the terms and conditions stated herein.

1.             Repayment of Principal and Interest. Principal and interest shall be repaid by Borrower to Lender as follows: Commencing on March 3, 2012, Borrower shall make monthly payment of interest only, in arrears, with subsequent payments being made on the corresponding day of each succeeding month. The Borrower shall repay the principal amount of this Note ON DEMAND; provided, however, that if demand is not sooner made, on February 3, 2015 (the “Maturity Date”), the Borrower shall pay to the Lender the unpaid principal balance of the Loan, all accrued and unpaid interest thereon, and all other costs and amounts payable to the Lender hereunder.

All amounts payable hereunder are payable in lawful money of the United States of America at the address of the Lender set forth above in immediately available funds. Prior to a Default, all payments shall be applied first on account of other charges, second to accrued interest due on the unpaid balance of principal and finally the remainder of such payments shall be applied to unpaid principal. If a Default occurs, payments and monies received may be applied in any manner and order deemed appropriate by the Lender.

2.             Rates and Calculation of Interest. Interest on the outstanding and unpaid principal balance of the Loan shall be calculated for the actual number of days in the then current calendar year that principal is outstanding, based upon a year of three hundred sixty (360) days, accrue and shall be paid at the fixed rate of interest per annum equal to ten percent (10%).

In no event shall the rate of interest hereunder be in excess of the maximum amount permitted by law. In the event the rate of interest hereunder is determined to be in excess of the maximum amount permitted by law, such interest rate shall be automatically decreased to the maximum rate permitted by law.

In addition to all other rights contained in this Note, if a Default (defined herein) occurs and as long as a Default continues, all outstanding sums hereunder shall bear interest at the interest rate otherwise prevailing under the preceding paragraph, plus 3% (the “Default Rate”). The Default Rate shall also apply from acceleration until all unpaid sums and obligations (whether matured or contingent) hereunder and any judgment thereon are paid in full.

3.             Prepayment. This Note may be prepaid in whole or in part at any time at the option of the Borrower without premium or penalty. Each prepayment shall be applied first to the payment in full of other charges payable hereunder, then to accrued interest and the remainder of such payment, if any, shall be applied to the reduction of the unpaid principal balance.

 

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4.             Loan Agreement. This Note is the Note referred to in the agreements between the Borrower, the Lender, and any surety executed in connection with this Note, including, but not limited to the Loan Agreement of even date herewith (the “Loan Agreement”) and the Loan Documents referenced therein (the “Loan Documents”). The failure of the Borrower and/or any surety to execute any such agreement or other document shall not affect the validity of this Note. This Note shall evidence all obligations of the Borrower to the Lender under the Loan Agreement and Loan Documents.

5.             Integration. The terms and conditions of this Note, together with the terms and conditions of the Loan Agreement and the Loan Documents, contains the entire understanding between the Borrower and the Lender with respect to the indebtedness evidenced hereby. Such understanding may not be amended, modified, or terminated except in writing duly executed by the parties hereto.

6.             Default and Remedies. The occurrence of any default or event of default (“Default”), as defined in the Loan Agreement and/or the Loan Documents, shall constitute a Default of and under this Note.

When a Default occurs, the Lender, at its option, may declare the entire unpaid balance of principal of this Note, unpaid interest thereon and all other charges, costs and expenses provided for herein, in the Loan Agreement and/or any of the Loan Documents, and/or pursuant to any other agreements between Borrower and Lender, immediately due and payable without notice to or demand upon the Borrower. Upon the occurrence of a Default, the Lender shall have all of the rights and remedies with respect to this Note and with respect to all of the Lender’s collateral and security as described or in the Loan Agreement, the Loan Documents, in this Note, and/or otherwise as provided for by law, in equity, mid otherwise, including the rights of a secured party under the Uniform Commercial Code of Pennsylvania.

7.             Security. As security for the payment of this Note and for all other indebtedness, obligations, and undertakings of the Borrower under the Loan Agreement and the Loan Documents, the Borrower acknowledges that it has granted to Lender a security interest, mortgage and/or other liens and rights in all of the collateral and security described in the Loan Agreement and/or in the Loan Documents. The Lender shall have no duty or obligation to the Borrower, or to any endorser, guarantor, surety, or other party, to perfect any lien or security interest of the Lender in the Lender’s collateral and security. In addition, the Lender shall not be required to marshal any collateral or security or guaranties or to resort to the same in any particular order.

8.            Waiver. The undersigned hereby waives presentment for payment, demand, notice of nonpayment, notice of protest, and protest of this Note, and all of the notices in connection with delivery, acceptance, performance, default, or enforcement of the payment of this Note. The failure by the Lender to exercise any right or remedy shall not be taken to waive the exercise of the same thereafter for the same or any subsequent Default. The Borrower waives any claim of set-off, recoupment and/or counterclaim. All notices to the Borrower shall be adequately given if mailed postage prepaid to the address appearing in the Lender’s records. The Borrower intends this Note to be a sealed instrument and to be legally bound hereby.

9.             Holder. The references to “Lender” herein shall be deemed to be references to any subsequent assignee, transferee, or other holder of this Note.

10.           Governing Law. This Note shall be construed in accordance with the domestic internal laws of the Commonwealth of Pennsylvania, without reference to any conflict of laws provisions, as a Note made, delivered and to be wholly performed within the Commonwealth of Pennsylvania.

 

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11.           Judicial Proceedings. Any suit, action, or proceeding, whether claim or counterclaim, brought or instituted by the Borrower or the Lender, or any of their successors or assigns, on or with respect to this Note or the dealings of the Borrower or the Lender with respect hereto, shall be tried only by a court and not by a jury. THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. In connection therewith, the Borrower agrees that any suit, action, or proceeding arising hereunder or with respect hereto will be instituted in the Court of Common Pleas of York County, Pennsylvania, or the United States District Court for the Middle District of Pennsylvania, and irrevocably and unconditionally submits to the jurisdiction of each such Court for such purpose. Further, the Borrower waives any right it may have to claim or recover, in any such suit, action or proceeding, any special, exemplary, punitive, or consequential damages or any damages other than, or in addition to, actual damages. THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS PARAGRAPH IS A SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT THE LENDER WOULD NOT EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS NOTE.

12.           Confession of Judgment. Upon Default, the Borrower hereby irrevocably authorizes the Prothonotary or any attorney of any court of record in Pennsylvania or elsewhere to appear for and confess judgment against the Borrower for any and all amounts unpaid hereunder, together with any other charges, costs and expenses for which Borrower is liable under this Note, and together with fees of counsel in the reasonable amount of five percent (5%) of all of the foregoing (but in no event less than $5,000.00) and costs of suit, releasing all errors and waiving all rights of appeal. If a copy of this Note, verified by affidavit, shall have been filed in such proceeding, it shall not be necessary to file the original as a warrant of attorney. The Borrower hereby waives the right to any stay of execution and the benefit of all exemption laws now or hereafter in effect. No single exercise of this warrant and power to confess judgment shall be deemed to exhaust this power, whether or not any such exercise shall be held by any court to be invalid, voidable or void, but this power shall continue undiminished and may be exercised from time to time as often as the Lender shall elect until all sums due hereunder shall have been paid in full. Interest shall continue to accrue after entry of judgment hereunder, by confession, default, or otherwise, at the higher of the prevailing rate of interest under this Note, or the judgment rate of interest under applicable law. All waivers granted in this paragraph are given to the extent permitted by the Pennsylvania Rules of Civil Procedure.

13.           NOTICE: THIS NOTE CONTAINS, AT PARAGRAPH 12, A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY, AND ON THE ADVICE OF SEPARATE COUNSEL OF THE BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES, THE COMMONWEALTH OF PENNSYLVANIA, OR OF ANY OTHER STATE.

BORROWER:

OCEAN THERMAL ENERGY CORPORATION

By: /s/ Stephen Oney, PhD

Name: Stephen Oney, PhD

Title: Director & Chief Science Officer

 

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DISCLOSURE FOR CONFESSION OF

JUDGMENT AND EXECUTION FOR NON-INDIVIDUALS

DATE: February 10, 2012

1.             TODAY, THE UNDERSIGNED FIRM IS EXECUTING A PROMISSORY NOTE AND OTHER RELATED INSTRUMENTS FOR $1,000,000, OBLIGATING THE UNDERSIGNED FIRM TO PAY THAT AMOUNT.

2.             A REPRESENTATIVE OF THE LENDER (OR OUR INDEPENDENT LEGAL COUNSEL) (THE “REPRESENTATIVE”) HAS EXPLAINED TO US IN OUR CAPACITIES AS A REPRESENTATIVE OF THE UNDERSIGNED FIRM THAT THE NOTE THE UNDERSIGNED FIRM IS SIGNING CONTAINS WORDING THAT WOULD PERMIT THE LENDER TO OBTAIN A JUDGMENT AGAINST THE UNDERSIGNED FIRM AT THE COURTHOUSE. THE REPRESENTATIVE HAS ALSO EXPLAINED TO US IN OUR CAPACITIES OF PRESIDENT AND SECRETARY RESPECTIVELY OF THE UNDERSIGNED FIRM THAT THE JUDGMENT MAY BE OBTAINED AGAINST THE UNDERSIGNED FIRM WITHOUT NOTICE TO THE UNDERSIGNED FIRM AND WITHOUT OFFERING THE UNDERSIGNED FIRM AN OPPORTUNITY TO DEFEND AGAINST THE ENTRY OF THE JUDGMENT, AND THAT THE JUDGMENT MAY BE COLLECTED BY ANY LEGAL MEANS.

3.             THE REPRESENTATIVE HAS ALSO EXPLAINED TO US IN OUR CAPACITIES AS A REPRESENTATIVE OF THE UNDERSIGNED FIRM THAT COLLECTION OF THE JUDGMENT MAY BE ACCOMPLISHED BY THE ISSUANCE OF A WRIT OF EXECUTION, GARNISHMENT, LEVY AND/OR OTHER EXECUTION PROCEEDINGS WHICH MAY BE COMMENCED AGAINST THE UNDERSIGNED FIRM BY THE LENDER WITHOUT PRIOR NOTICE AND HEARING AND THAT EXECUTION PROCEEDINGS MAY INVOLVE THE SEIZURE AND SALE OF THE UNDERSIGNED FIRM’S PROPERTY BY A SHERIFF, MARSHALL OR OTHER AUTHORITY.

4.             IN SIGNING THE NOTE, THE UNDERSIGNED FIRM IS KNOWINGLY, UNDERSTANDINGLY AND VOLUNTARILY CONSENTING TO THE CONFESSION OF JUDGMENT AND THE UNDERSIGNED FIRM IS WAIVING THE UNDERSIGNED FIRM’S RIGHTS, TO THE EXTENT PERMITTED BY LAW, TO RESIST THE ENTRY OF JUDGMENT AGAINST THE UNDERSIGNED FIRM AT THE COURTHOUSE INCLUDING:

(a)           THE RIGHT TO NOTICE AND A HEARING;

(b)           THE RIGHT TO REDUCE OR SET-OFF A CLAIM BY DEDUCTING A CLAIM THE UNDERSIGNED FIRM MAY HAVE AGAINST THE LENDER (CALLED THE “RIGHT OF DEFALCATION”);

(c)           RELEASE OF ERROR;

(d)           INQUEST (THE RIGHT TO ASCERTAIN WHETHER THE RENTS AND PROFITS OF THE UNDERSIGNED FIRM’S REAL ESTATE WILL BE SUFFICIENT TO SATISFY THE JUDGMENT WITHIN SEVEN YEARS);

(e)           STAY OF EXECUTION;

(f)            EXEMPTION LAWS NOW IN FORCE OR HEREAFTER TO BE PASSED;

(g)           THE RIGHT TO DEFEND AGAINST THE ENTRY OF JUDGMENT AGAINST THE UNDERSIGNED FIRM.

5.             IN SIGNING THE NOTE, THE UNDERSIGNED FIRM IS KNOWINGLY, UNDERSTANDINGLY AND VOLUNTARILY CONSENTING TO THE ISSUANCE AND PURSUIT AGAINST THE UNDERSIGNED FIRM OF EXECUTION, GARNISHMENT, LEVY AND/OR OTHER EXECUTION PROCEEDINGS AND WAIVING THE UNDERSIGNED FIRM’S RIGHTS, TO THE EXTENT PERMITTED BY LAW, TO NOTICE AND A HEARING PRIOR TO THE ISSUANCE AND PURSUIT OF EXECUTION, GARNISHMENT, LEVY AND/OR OTHER EXECUTION PROCEEDINGS.

6.             THE UNDERSIGNED FIRM CERTIFIES THAT THE UNDERSIGNED FIRM HAS DISCUSSED THIS DISCLOSURE WITH THE UNDERSIGNED FIRM’S ATTORNEY-AT-LAW AND THE ATTORNEY-AT-LAW FULLY EXPLAINED TO THE UNDERSIGNED FIRM THE CONTENTS AND MEANING OF THIS DISCLOSURE.

 

4

  

  

  

THE UNDERSIGNED FIRM IS A CORPORATION WHICH IS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND THE UNDERSIGNED INDIVIDUALS ARE THE REPRESENTATIVES OF THE UNDERSIGNED FIRM DULY AUTHORIZED TO EXECUTE THIS DISCLOSURE ON BEHALF OF THE UNDERSIGNED FIRM. WE CERTIFY THAT THE BLANKS IN THIS DISCLOSURE WERE FILLED IN WHEN WE INITIALED AND SIGNED IT, AND THAT THE UNDERSIGNED FIRM RECEIVED A COPY OF THE DISCLOSURE AT THE TIME OF SIGNING.

TERMS USED HEREIN SHALL BE CONSTRUED AS USED AND/OR DEFINED IN THE NOTE.

	
NAME OF FIRM:

	
OCEAN THERMAL ENERGY CORPORATION

	  	  
	  	
By: /s/ Stephen Oney, PhD

	  	
Name: Stephen Oney, PhD

	  	
Title: Director & Chief Science Officer

	
STATE OF HAWAII

	
)

	  	
ss.

	
CITY AND COUNTY OF HONOLULU

	
)

On this 13th day of February, 2012, before me appeared STEPHEN ONEY, PHD, to me personally known, who being by me duly sworn, did say that he is the Director & Chief Science Officer of OCEAN THERMAL ENERGY CORPORATION, a Delaware corporation; and that said instrument was signed on behalf of OCEAN THERMAL ENERGY CORPORATION, and that said officer acknowledged said instrument to be the fee act and deed of OCEAN THERMAL ENERGY CORPORATION.

	
/s/ Luz D. Casiles

	
Print Name: Luz D. Casiles

	
Notary Public, State of Hawaii

	
My commission expires: 6/2/2014

NOTARY CERTIFICATION STATEMENT

Document Identification or Description:

DISCLOSURE FOR CONFESSION OF JUDGMENT AND EXECUTION FOR NON-INDIVIDUALS

(Put title of document, together with Apt. No. and Name of Project)

Document Date: 2/13/2012

No. of Pages: 7 Jurisdiction: First Circuit (in which notarial act is performed)

/s/ Luz D. Casiles

Signature of Notary

Date of Notarization and Certification Statement

[notary stamp]

(Official Stamp or Seal)

Printed Name of Notary: Luz D. Casiles

 

5

  

  

  

WARRANT

to Purchase up to 3,295,761 Shares of the

Common Stock, $-0- Par Value Per Share,

of

OCEAN THERMAL ENERGY CORPORATION

This is to certify that, for value received, DCO Energy, LLC (“Lender”) or any permitted transferee (Lender or such transferee being hereinafter called the “Holder”) is entitled to purchase, subject to the provisions of this Warrant, from Ocean Thermal Energy Corporation, a Delaware corporation (“OTEC”), at any time on or after the date hereof, an aggregate of up to 3,295,761 fully paid and non-assessable shares of common stock, $ -0- par value (the “Common Stock”), of OTEC at a price per share equal to $0.50, subject to adjustment as herein provided (the “Exercise Price”).

1.             Exercise of Warrant. Subject to the provisions hereof, this Warrant may be exercised, in whole or in part, or sold, assigned or transferred at any time or from time to time on or after the date hereof. This Warrant shall be exercised by presentation and surrender hereof to OTEC at the principal office of OTEC, accompanied by (i) a written notice of exercise and (ii) payment to OTEC, for the account of OTEC, of the Exercise Price for the number of shares of Common Stock specified in such notice. . The Exercise Price for the number of shares of Common Stock specified in the notice shall be payable in immediately available funds.

Upon such presentation and surrender, OTEC shall issue promptly (and within one business day if reasonably requested by the Holder) to the Holder or its assignee, transferee or designee the number of shares of Common Stock to which the Holder is entitled hereunder. OTEC covenants and warrants that such shares of Common Stock, when so issued, will be duly authorized, validly issued, fully paid and non-assessable, and free and clear of all liens and encumbrances.

If this Warrant is exercised in part only, OTEC shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the shares of Common Stock issuable hereunder. Upon receipt by OTEC of this Warrant, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of OTEC may then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. OTEC shall pay all expenses, and any and all United States federal, state and local taxes and other charges, that may be payable in connection with the preparation, issuance and delivery of stock certificates pursuant to this Paragraph 1 in the name of the Holder or its assignee, transferee or designee.

2.             Reservation of Shares; Preservation of Rights of Holder. OTEC shall at all times while this Warrant is outstanding and unexercised, maintain and reserve, free from preemptive rights, such number of authorized but unissued shares of Common Stock as may be necessary so that this Warrant may be exercised without any additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to acquire shares of Common Stock at the time outstanding. OTEC further agrees that (i) it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act or omission, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder, and (ii) it will promptly take all action reasonably necessary to protect the rights of the Holder against dilution as provided herein.

 

1

  

  

  

3.             Fractional Shares. OTEC shall not be required to issue any fractional shares of Common Stock upon exercise of this Warrant. In lieu of any fractional shares, the Holder shall be entitled to receive an amount in cash equal to the amount of such fraction multiplied by the Exercise Price.

4.             Exchange or Loss of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof at the principal office of OTEC for other warrants of different denominations entitling the Holder to purchase, in the aggregate, the same number of shares of Common Stock issuable hereunder. The term “Warrant” as used herein includes any warrants for which this Warrant may be exchanged. Upon receipt by OTEC of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, OTEC will execute and deliver a new Warrant of like tenor and date.

5.             Adjustment. The number of shares of Common Stock issuable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as provided in this Paragraph.

(A)           Stock Dividends, etc.

(1)           Stock Dividends. In case OTEC shall pay or make a dividend or other distribution on any class of capital stock of OTEC payable in Common Stock, the number of shares of Common Stock issuable upon exercise of this Warrant shall be increased by multiplying such number of shares by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the day immediately preceding the date of such distribution and the numerator shall be the sum of such number of shares and the total number of shares of Common Stock constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following such distribution.

(2)           Subdivisions. In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the number of shares of Common Stock issuable upon exercise of this Warrant at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the number of shares of Common Stock issuable upon exercise of this Warrant at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately decreased, such increase or decrease, as the case may be, to become effective immediately after the opening of business on the day following the date upon which such subdivision or combination becomes effective.

(3)           Reclassifications. The reclassification of Common Stock into securities (other than Common Stock) and/or cash and/or other consideration shall be deemed to involve a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number or amount of securities and/or cash and/or other consideration outstanding immediately thereafter and the effective date of such reclassification shall be deemed to be “the day upon which such subdivision becomes effective,” or “the day upon which such combination becomes effective,” as the case may be, within the meaning of clause (2) above.

 

2

  

  

  

(4)           Optional Adjustments. OTEC may make such increases in the number of shares of Common Stock issuable upon exercise of this Warrant, in addition to those required by this subparagraph (A), as shall be determined by its Board of Directors to be advisable in order to avoid taxation so far as practicable of any dividend of stock or stock rights or any event treated as such for federal income tax purposes to the recipients.

(5)           Adjustment to Exercise Price. Whenever the number of shares of Common Stock issuable upon exercise of this Warrant is adjusted as provided in this Paragraph 5(A), the Exercise Price shall be adjusted by a fraction in which the numerator is equal to the number of shares of Common Stock issuable prior to the adjustment and the denominator is equal to the number of shares of Common Stock issuable after the adjustment, rounded to the nearest cent.

(B)           Certain Sales of Common Stock.

(1)           Adjustment to Shares Issuable. If and whenever OTEC sells or otherwise issues (other than under circumstances in which Paragraph 5(A) applies) any shares of Common Stock, the number of shares of Common Stock issuable upon exercise of this Warrant shall be increased by multiplying such number of shares by a fraction, the denominator of which shall be the number shares of Common Stock outstanding at the close of business on the day immediately preceding the date of such sale or issuance and the numerator of which shall be the sum of such number of shares and the total number of shares constituting such sale or other issuance, such increase to become effective immediately after the opening of business on the day following such sale or issuance.

(2)           Adjustment to Exercise Price. If and whenever OTEC sells or otherwise issues any shares of Common Stock (excluding any stock dividend or other issuance not for consideration to which Paragraph 5(A) applies or shares of Common Stock issued or issuable in connection with awards granted under the OTEC Stock Option Plans) for a consideration per share which is less than the Exercise Price at the time of such sale or other issuance, then in each such case the Exercise Price shall be forthwith changed (but only if a reduction would result) to the price (calculated to the nearest cent) determined by dividing: (i) an amount equal to the sum of (aa) the number of shares of Common Stock outstanding immediately prior to such issue or sale, multiplied by the then effective Exercise Price, plus (bb) the total consideration, if any, received and deemed received by OTEC upon such issue or sale, by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale.

(C)           Definition. For purposes of this Paragraph 5, the term “Common Stock” shall include (1) any shares of OTEC of any class or series which has no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of OTEC and which is not subject to redemption by OTEC, and (2) any rights or options to subscribe for or to purchase shares of Common Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such convertible or exchangeable stock or securities being hereinafter called “Convertible Securities”), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable. For purposes of any adjustments made under Paragraph 5(A) or 5(B) as a result of the distribution, sale or other issuance of rights or options or Convertible Securities, the number of shares of Common Stock outstanding after or as a result of the occurrence of events described in Paragraph 5(A)(1) or 5(B)(1) shall be calculated by assuming that all such rights, options or Convertible Securities have been exercised for the maximum number of shares issuable thereunder.

 

3

  

  

  

6.             Notice. Whenever the number of shares of Common Stock for which this Warrant is exercisable is adjusted as provided in Paragraph 5, OTEC shall promptly compute such adjustment and mail to the Holder a certificate, signed by the principal financial officer of OTEC, setting forth the number of shares of Common Stock for which this Warrant is exercisable as a result of such adjustment having become effective.

7.             Rights of the Holder.

(A)          Without limiting the foregoing or any remedies available to the Holder, it is specifically acknowledged that the Holder would not have an adequate remedy at law for any breach of the provisions of this Warrant and shall be entitled to specific performance of OTEC’s obligations under, and injunctive relief against any actual or threatened violation of the obligations of any person subject to, this Warrant.

(B)           The Holder shall not, by virtue of its status as Holder, be entitled to any rights of a stockholder in OTEC.

8.             Termination. This Warrant and the rights conferred hereby shall terminate on February 3, 2015.

9.             Governing Law. This Warrant shall be deemed to have been delivered in, and shall be governed by and interpreted in accordance with the substantive laws of, the Commonwealth of Pennsylvania, except to the extent that Delaware law may govern certain aspects of this Warrant as it relates to OTEC.

	
Dated: February 10, 2012

	
OCEAN THERMAL ENERGY CORPORATION

	  	  
	  	
By: /s/ Stephen Oney, PhD

	  	
Name: Stephen Oney, PhD

	  	
Title: Director & Chief Science Officer

4ex1010form10.htm

OCEAN THERMAL ENERGY CORPORATION

SUBSCRIPTION AGREEMENT

This offer and agreement (this “Subscription Agreement”) of the undersigned (“Purchaser”) relates to the purchase of Series A Units of the Company (the “Units”) in connection with the Company’s private offering of up to $3 million worth of Units (the “Offering”). Each Unit consists of a 10% Unsecured $[amount] Note (the “Note”) plus a warrant to purchase [amount] shares of the Company’s Common Stock (the “Warrant”) at an offering price of $[amount] per Unit (the “Offering Price”). The Units, the Notes, the Warrants and the underlying Common Stock are referred to collectively herein as the “Securities.”

1.           Amount of Investment. Purchaser, having received and read in its entirety the Company’s Confidential Private Placement Memorandum dated February 1, 2012, and all supplements and amendments thereof if any (the “PPM”), hereby offers to purchase the number of Units set forth on page 3 for a total purchase price of such number of Units times the Offering Price (the “Subscription Amount”). (For more information regarding the Units, please refer to the PPM.)

2.           Purchaser Representations, Warranties, Covenants and Agreements. Purchaser represents, warrants, covenants and agrees with the Company as follows, as a material inducement to the Company entering into and performing this Subscription Agreement:

2.1           Background Information and Investment Representations. All information that Purchaser has provided to the Company in response to the questions posed by that certain confidential purchaser questionnaire executed by Purchaser on or about the date hereof (the “Purchaser Questionnaire”), including without limitation, information concerning Purchaser’s suitability to invest in the Securities, is complete, accurate and correct as of the date of the signature on the last page of this Subscription Agreement. Purchaser hereby agrees to notify the Company immediately of any material change in any such information occurring prior to the acceptance of this Subscription Agreement.

2.1.1           Enforceability. This Subscription Agreement has been duly executed and delivered by Purchaser and constitutes a valid and legally binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

2.1.2           Effect and Time of Representations. The representations, warranties and agreements made by Purchaser as set forth in this Subscription Agreement are true, and have been complied with, as of the date of the execution of this Subscription Agreement and shall be true, and shall have been complied with, until such time as the subscription is accepted or rejected. If in any respect such representations, warranties or agreements shall not be true, or shall not have been complied with, as of any date set forth in the preceding sentence, Purchaser will promptly give written notice of such fact to the Company and shall specify which representations, warranties or agreements are not true or have not been complied with, along with the reasons therefor. Purchaser acknowledges that the Company has relied and will rely upon Purchaser’s representations, warranties and agreements as set forth in this Subscription Agreement and that all such representations and agreements shall survive the issuance and delivery of the Securities hereunder and shall remain in effect thereafter. Purchaser hereby agrees and acknowledges that this subscription is irrevocable with respect to Purchaser and agrees and acknowledges that the agreements and representations herein set forth shall become effective and binding upon Purchaser and Purchaser’s heirs, legal representatives, successors and assigns upon the Company’s acceptance hereof.

2.2           Execution Authority. If an individual, Purchaser represents and warrants that Purchaser is of majority age under the laws applicable to him or her and under no disability with respect to entering into a contractual relationship with the Company by executing this Subscription Agreement.

 

 

	Subscription Agreeement	 1	 

  

  

  

 

3.           Indemnification. Purchaser understands the meaning and legal consequences of the representations, warranties and agreements set forth in this Subscription Agreement and agrees to indemnify and hold harmless the Company, its officers, directors, employees, agents and controlling persons thereof, past, present or future, from and against any and all liabilities, losses, costs, damages and expenses, including costs and reasonable attorneys’ fees, arising out of or related to (i) the resale or other distribution by Purchaser of all or any portion of the Securities in violation of the Securities Act or of any applicable state securities laws, and/or (ii) any breach of any of Purchaser’s representations, warranties or agreements contained in this Subscription Agreement or in any other document provided by Purchaser to the Company in connection with Purchaser’s investment in the Securities.

4.           Offer Irrevocable; Acceptance Procedure. Execution and delivery of this Subscription Agreement shall constitute an irrevocable offer to purchase the number of Securities equal to the Subscription Amount, which offer may be accepted or rejected by the Company. Deposit of checks or of funds into an account shall not constitute acceptance of a subscription. The Company will determine in its sole discretion whether to accept this subscription for Securities for all or any portion of the Units applied for or whether to reject this subscription in its entirety. In the event that the Company rejects all or a portion of the requested subscription offer, the Company will refund to Purchaser all, or the appropriate portion of, the amount remitted with this Subscription Agreement. The Company, in its sole discretion, will decide which subscription offers (or portions thereof) to accept, and all appropriate refunds will be mailed, no later than two weeks following the earlier of the closing, termination or expiration of the Offering. If for any reason this Subscription Agreement has been executed and delivered without payment in full and the Company accepts such subscription and notifies Purchaser of the date of the closing of the Offering, Purchaser agrees to provide payment in full for all units subscribed for hereunder within days of the date of such notice.

IMPORTANT: TWO COPIES OF THIS SUBSCRIPTION AGREEMENT, MUST BE RECEIVED BY THE COMPANY BY 5 P.M., EASTERN TIME, ON OR BEFORE MARCH 31, 2012, UNLESS EXTENDED BY THE COMPANY (the “Offering Expiration Date”). WE URGE YOU TO REMIT PROMPTLY SINCE THE OFFERING MAY CLOSE PRIOR TO THE OFFERING EXPIRATION DATE.

PLEASE MAIL TWO COPIES OF THIS SUBSCRIPTION AGREEMENT TO:

Edward M. Baer

Chief Financial Officer and Treasurer

Ocean Thermal Energy Corporation

800 South Queen Street

Lancaster, PA 17603-5818

United States of America

Payment may only be made by check or funds payable to “Ocean Thermal Energy Corporation”:

Subscriptions are irrevocable. Funds delivered by a subscriber in connection with their Subscription Application will not be returned to a subscriber for any reason, in the Company’s sole discretion, unless the Company rejects a subscriber’s subscription, and in the event of rejection, only the portion of the funds that represent the portion of the subscription rejected will be returned, without any accrued interest.

The subscription price will be deemed to have been received only upon receipt of collected funds, in the full amount of the subscription price. If paying by uncertified personal check, funds paid thereby may take at least five business days or more to clear. Accordingly, a subscriber who wishes to pay the subscription price by means of uncertified personal check is urged to make payment sufficiently in advance of the Offering Expiration Date or any earlier termination date to ensure that the subscriber’s check is received and clears by the Offering Expiration Date and is urged to consider an alternative means of payment, such as by means of certified or cashier’s check, money order or wire transfer of funds.

5.           Entire Agreement. Except as otherwise expressly stated herein, this Subscription Agreement and Purchaser Questionnaire constitute the entire agreement between Purchaser and the Company with respect to the subject matter hereof, and supersedes all prior or contemporaneous understandings or agreements, whether oral or written, This Subscription Agreement can only be amended by a writing signed by both Purchaser and the Company, except as provided herein with respect to rejection of this Subscription Agreement by the Company.

 

 

	Subscription Agreeement	 2	 

  

  

  

 

6.           Notice to Residents of All States: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OFFICE OF THRIFT SUPERVISION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE PPM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

7.           Title. Title to the Securities being purchased is to be held in the name or names as printed immediately below (Please print or type exact name(s) the certificates should be issued in): _____________

8.           Residency. My primary state of residence (for a natural person) or the state where the principal executive office is located (for an entity) is: ______________________________

[This may be different from the address below and is important for the Company to confirm compliance with applicable securities laws.]

Number of Units Subscribed: _____________

Total Purchase Price (Number of Units Subscribed times the purchase price per Unit of $[amount]) (“Subscription Amount”): _____________

The form of ownership of the Securities being purchased is as follows (circle one):

	
  

	
1.1

	
Separate Property (one party must sign) but in community property states, if the Purchaser is married, then his (her) spouse must sign and submit the Consent of Spouse form attached hereto as Attachment A;

	
  

	
1.2

	
Joint Tenants (all must sign and please describe relationship);

	
  

	
1.3

	
Tenants in Common (all parties must sign);

	
  

	
1.4

	
Community Property (both husband and wife must sign);

1.5           Other, e.g., custodian, trustee, etc. Describe fully:

_______________________________________

_______________________________________

_______________________________________

Name and Address of Purchaser for mailing notices and certificates:

_______________________________________

_______________________________________

_______________________________________

Federal Tax ID Number or Social Security Number: _________________

PLEASE RETURN TWO COPIES OF THIS SUBSCRIPTION AGREEMENT TO THE COMPANY AND RETAIN THE ONE COPY FOR YOUR RECORDS

 

 

 

	Subscription Agreeement	 3	 

  

  

  

 

IN WITNESS WHEREOF, the undersigned has executed and entered into this Subscription Agreement on behalf of Purchaser.

If Units to be held jointly by more than one owner, all joint owners should sign this Subscription Agreement below. Each of the undersigned has executed this Subscription Agreement and returned two hereof to the Company at the address set forth above, accompanied by payment in full in the manner set forth above. Each of the undersigned understands that all information submitted on this Subscription Agreement will be treated confidentially.

	
Signature:

	  	  	
Date:

	  
	  	  	  	  	  
	
Print Name:

	  	  	  	  
	  	  	  	  	  
	
Title:

	  	  	  	  
	  	  	  	  	  
	
Signature:

	  	  	
Date:

	  
	  	  	  	  	  
	
Print Name:

	  	  	  	  
	  	  	  	  	  
	
Title:

	  	  	  	  

Subscription Agreement Accepted by Ocean Thermal Energy Corporation:

	
Signature:

	  	  	
Date:

	  
	  	  	  	  	  
	
Print Name:

	  	  	  	  
	  	  	  	  	  
	
Title:

	  	  	  	  

 

 

	Subscription Agreeement	 4	 

  

  

  

 

ATTACHMENT A

CONSENT OF SPOUSE

(For purchasers in community property states, which are currently

Alaska, Arizona, California, Idaho, Louisiana, Nevada,

New Mexico, Texas, Washington and Wisconsin)

 

	I, _______________________________________________________________________________________,	 spouse of 	 ______________________________________________________________________________________
	
[print name]

	 	
[print name]

have read and hereby approve of the Ocean Thermal Energy Corporation Subscription Agreement (the “Subscription Agreement”), which my spouse has signed and to which this Consent of Spouse is attached. I hereby appoint my spouse as my attorney-in-fact with respect to the exercise of any rights related to a purchase of any Common Stock and agree to be bound by the provisions of the Subscription Agreement, the Confidential Private Placement Memorandum of Ocean Thermal Energy Corporation dated February 1, 2012, and all Exhibits thereto (“Memorandum”), and any other documents related to the purchase of any such Common Stock (collectively, the “Purchase Documents”) insofar as I may have any rights in said Purchase Documents or any property or interest subject thereto under the community property laws of the State of __________________ or similar laws relating to marital property in effect in the state of our residence as of the date of signing of the Subscription Agreement and/or the Purchase Documents.

	
Dated: _______________________, 20____

	  
	  	
[signature]

 

 

 

	Subscription Agreeement	 5	 

  

  

  

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW (COLLECTIVELY, “SECURITIES LAWS”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER: (1) AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE UNDER THE SECURITIES LAWS; OR (2) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER OF THE NOTE IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER SHOWING THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES LAWS DUE TO AN EXEMPTION FROM THEIR REGISTRATION REQUIREMENTS.

OCEAN THERMAL ENERGY CORPORATION

SERIES A 10% UNSECURED NOTE

	
$[amount]

	
[issuance date], 2012

	
NOTE # __________

	  
	  	  

OCEAN THERMAL ENERGY CORPORATION, a Delaware corporation (“OTE”), for value received, hereby promises to pay to [name of holder] (“Holder”), its successors and assigns, the principal sum of [NOTE AMOUNT] DOLLARS ($[note amount]), with interest on the unpaid principal amount of this Note from time to time outstanding, computed on the basis of a 365-day year for the actual number of days elapsed, at the fixed annual rate of ten percent (10%).

	
1.

	
This Note is issued pursuant to OTE’s Confidential Private Placement Memorandum dated [February/April] 1, 2012 regarding the offering of Series A Units of OTE, each consisting of a $[amount] 10% Unsecured Note and a warrant to purchase [amount] shares of the common stock of OTE (the “Offering”).

	
2.

	
The principal sum shall bear interest; commencing on the date hereof to and including the date it is repaid in full, at a rate of ten percent (10%) per annum. OTE will pay interest only on the outstanding principal balance of this Note, at the foregoing rate, quarterly. in arrears beginning on the last business day of each of August, November, February and May commencing on [date] and continuing until all amounts owing under this Note, including principal and accrued interest thereon, have been paid in full. This Note shall mature on [date], whereupon the entire unpaid principal amount of this Note shall be due and payable in full.

	
3.

	
All cash payments on or in respect of this Note, including principal and interest thereon, shall be made in such coin and currency of the United States as at the time of payment is legal tender for the payment of public and private debts, by wire transfer pursuant to written wire transfer instructions given by Holder to OTE from time to time or, at Holder’s option, in such manner and at such other place in the United States as Holder shall designate to OTE in writing. Such designation shall be provided in writing to OTE no later than ten (10) business days before any payment on the Note is due.

	
4.

	
This Note is subject to optional prepayment by OTE without penalty.

	
5.

	
Any of the following is an Event of Default, entitling Holder to demand immediate payment of the entire unpaid principal balance of this Note and any accrued interest thereon:

	
  

	
a.

	
OTE’s failure to make an interest or principal payment that is due and payable for a period of ten (10) business days following its receipt of written notice from Holder that it has not made such payment.

	
  

	
b.

	
OTE becomes insolvent, admits in writing its inability to pay its debts as they become due, makes an assignment for the benefit of creditors, commences proceedings for its dissolution, or applies for or consents to the appointment of a trustee, liquidator, or receiver for its or for a substantial part of its property or business.

 

 

	Series A 10% Unsecured Note	 1	 

  

  

  

 

	
  

	
c.

	
A trustee, liquidator or receiver is appointed for OTE or for a substantial part of its property or business without its consent and such appointment is not discharged within sixty (60) days thereafter,

	
  

	
d.

	
A governmental agency or court of competent jurisdiction assumes custody or control of the whole or a substantial portion of the properties or assets of OTE.

	
  

	
e.

	
Any money judgment, writ or note of attachment, or similar process in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate is entered against OTE or any of its properties or assets and OTE has not taken appropriate steps within fifteen (15) days of its entry to arrange for payment or to have the process vacated, bonded or stayed.

	
  

	
f.

	
Bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors are instituted by OTE or against OTE and are either not dismissed within sixty (60) days thereafter or OTE by any action or answer approves of, consents to or acquiesces in any such proceedings or admits the material allegations of or defaults in answering a petition filed in any such proceeding.

	
  

	
g.

	
A sale of all or substantially all of the outstanding capital shares or assets of OTE.

	
6.

	
Notices shall be made by any means by which delivery is verified to the following:

If to Holder:

___________________

___________________

___________________

If to OTE:

800 South Queen Street

Lancaster, PA 17603

Attn: Jeremy P. Feakins, Chairman and CEO

	
7.

	
This Note shall be binding upon OTE, its successors and permitted assigns, and shall inure to the benefit of the OTE, its successors and assigns.

	
8.

	
This Note is a contract made under and governed by, and shall be construed and enforced in accordance with, the laws of the State of Pennsylvania, without regard to conflict of laws principles.

OCEAN THERMAL ENERGY CORPORATION

By: /s/ authorized officer

 

	Series A 10% Unsecured Note	 2	 

  

  

  

 

FORM OF WARRANT

WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF

OCEAN THERMAL ENERGY CORPORATION

THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION THEREOF OR AN OPINION OF COUNSEL THAT IS DELIVERED TO AND SATISFACTORY TO OCEAN THERMAL ENERGY CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

OCEAN THERMAL ENERGY CORPORATION (the “Company”) certifies that the Holder hereof has the right to purchase from the Company a number of duly authorized, validly issued, fully paid and non-assessable shares of the Company’s Common Stock, no par value (“Common Stock”), at the Exercise Price, during the Exercise Term and subject to the terms and conditions provided below.

Holder agrees that this Warrant is issued and all rights hereunder are held subject to all of the terms and conditions set forth herein.

Holder

[holder name] or any subsequent Holder (collectively, “Holder”).

Date of Issuance

[date of issuance]

Number of Shares of Common Stock

[number] shares of the Company’s Common Stock, no par value.

Exercise Price

$3.00 per share.

Term of Warrant

This Warrant is valid from its Date of Issuance through the close of business (Eastern Time) on May 31, 2017 (the “Expiration Date”).

Exercise Term

This Warrant may be exercised at any time during the Term of this Warrant.

Method of Exercise

	
1.

	
Manner of Exercise. Holder may exercise this Warrant for a number of full shares of Common Stock covered by this Warrant by sending all of the following to the Company at its offices located at c/o 800 South Queen Street, Lancaster, Pennsylvania 17603, United States of America:

a.           This Warrant.

b.           A completed Exercise Form (see attachment).

c.           The full Exercise Price for each share of Common Stock for which this Warrant is exercised.

 

 

	Warrant	 1	 

  

  

  

 

	
2.

	
Date of Exercise. The date of exercise shall be the date on which the Company receives the Warrant, the completed Exercise Form and the full Exercise Price.

	
3.

	
Cancellation of Warrant. The Company will cancel this Warrant upon exercise. If this Warrant is not exercised in full, the Company will issue to Holder a new Warrant containing terms identical to this Warrant for any unexercised portion of this Warrant.

	
4.

	
Delivery of Shares. The Company will deliver to Holder the number of shares that Holder purchased upon such exercise as soon as practicable after the date of exercise.

	
5.

	
Shareholder of Record. The Company shall deem the person(s) to whom it is to deliver shares from the exercise of this Warrant to be the shareholder(s) of record of such shares as of the date of exercise irrespective of the date of delivery of such shares.

Payment of Exercise Price

The Exercise Price may be paid made by tender of United States currency in the form of cash, certified check, cashier’s check, wire transfer or a combination thereof.

Anti-Dilution Provisions

	
1.

	
Recapitalization, Reclassification Stock Dividend or Stock Split. If the Company effects a recapitalization, reclassification, stock dividend, stock split or other similar transaction where its shares of Common Stock are changed into or become exchangeable for a larger or smaller number of shares, the number of shares of Common Stock and the Exercise Price of this Warrant shall be changed in direct proportion thereto.

	
2.

	
Notice of Corporate Change. In the event of a merger, consolidation, exchange of shares, recapitalization, reorganization or similar event where shares of Company Common Stock will be changed into a different number of shares or another class of securities or other assets of the Company or another entity or there will be a sale of all or substantially all the Company’s assets (“Corporate Change”), the Company will give Holder thirty days prior notice and an opportunity to exercise this Warrant in that period.

Reservation of Shares

The Company shall reserve a sufficient number of duly authorized and unissued shares of Common Stock for exercise of this Warrant, and such shares will be free of all taxes, liens and charges created by or through the Company.

Restrictions on Transfer of Warrant and Shares

	
1.

	
Registration or Exemption Required. This Warrant has been issued and the shares of Common Stock issuable hereunder will be issued in a transaction exempt from the registration requirements of the Act and applicable state securities laws. Therefore, they may not be sold, transferred, or otherwise disposed of in any manner except pursuant to an effective registration statement or an exemption from the registration requirements.

	
2.

	
Restrictive Legend. The shares issuable hereunder shall be imprinted with a legend in substantially the same form as appears on this Warrant.

	
3.

	
Warranty of Holder. Holder represents and warrants to the Company that Holder’s acquisition of this Warrant and the shares of Common Stock issuable hereunder are solely for Holder’s own account and not as a nominee for any other party, that the acquisition is for investment purposes only and that Holder will not offer, sell, transfer or otherwise dispose of this Warrant or any shares issuable hereunder except pursuant to an effective registration statement or an exemption from registration under the Act and applicable state securities laws.

Limitation

This Warrant confers rights and obligations only upon the Company and Holder and upon no other person or entity.

 

 

	Warrant	 2	 

  

  

  

 

Governing Law

Pennsylvania law governs all matters related to this Warrant without regard to conflict of laws principles.

Loss of Warrant

If this Warrant is lost, stolen, destroyed or mutilated, the Company will reissue a Warrant on the same applicable terms after its receipt of (a) satisfactory evidence of the loss, theft, destruction or mutilation of this Warrant and (b) either indemnity or security reasonably satisfactory to the Company in the case of loss, theft or destruction, or this Warrant in the case of mutilation.

Costs

Holder shall pay all costs associated with the exercise or transfer of this Warrant including, without limitation, reasonable attorney’s fees incurred by the Company.

Notice

	
1.

	
Holder shall send all notices to the Company by certified or registered mail return receipt requested postage prepaid, and addressed to Ocean Thermal Energy Corporation, c/o 800 South Queen Street, Lancaster, Pennsylvania 17603, United States of America.

	
2.

	
The Company shall send all notices to Holder by certified or registered mail return receipt requested, postage prepaid, and addressed to Holder’s address set forth below, provided that Holder may designate another address for notices in writing to the Company:

Name and address

_________________________

_________________________

_________________________

IN WITNESS WHEREOF, the undersigned has executed this Warrant.

OCEAN THERMAL ENERGY CORPORATION

By: /s/ authorized officer

 

 

	Warrant	 3	 

  

  

  

WARRANT EXERCISE FORM

TO: Ocean Thermal Energy Corporation

The undersigned hereby irrevocably exercises the right to purchase __________ shares of Common Stock, no par value, of Ocean Thermal Energy Corporation (the “Company”).

Enclosed is the original Warrant issued by the Company entitling the undersigned to such exercise.

Enclosed in full payment of the total Exercise Price of $__________ for __________ shares at $3.00 per share.

The undersigned requests that the Company issue stock certificates for __________ shares to the following:

Holder

Name and address

_________________________

_________________________

_________________________

The undersigned understands that the purchased shares have not been registered under the Securities Act of 1933, as amended (the “Act”) or any state securities law (the “Securities Laws”), and are therefore restricted securities which may not be sold, transferred, or otherwise disposed unless the shares are registered in accordance the Securities Laws or the undersigned has delivered an opinion of counsel satisfactory to the Company that the shares are exempt from registration under the Securities Laws.

Date: __________

Holder Signature: ________________________________________

Print name and address:

________________________________________

________________________________________

________________________________________

 

	Warrant	 4	 

  

  

  

	
Series A Notes and Warrants

	
Name

	
 Note Amount

	
Note Issuance

	
# of Warrants

	
Exercise Price

	
Warrant Issuance

	
Expiration

	  	  	  	  	  	  	  
	
Lori Townsend

	
 $           50,000.00

	
03/26/12

	
  50,000

	
$3.00

	
03/31/12

	
03/31/17

	
Michael Baer

	
 $           50,000.00

	
03/27/12

	
  50,000

	
$3.00

	
03/31/12

	
03/31/17

	
Steven Triantafyllou

	
 $         100,000.00

	
03/07/12

	
100,000

	
$3.00

	
03/07/12

	
03/31/17

	
Gergory Orloff

	
 $         100,000.00

	
03/07/12

	
100,000

	
$3.00

	
03/31/12

	
03/31/17

	
James Bergdoll (B&B Enterprises)

	
 $           25,000.00

	
03/14/12

	
  25,000

	
$3.00

	
03/31/12

	
03/31/17

	
R. Elliot Katherman (Sundazed)

	
 $           25,000.00

	
03/07/12

	
  25,000

	
$3.00

	
03/31/12

	
03/31/17

	
Sunny & Jon Corbin

	
 $           50,000.00

	
04/01/12

	
  50,000

	
$3.00

	
05/11/12

	
03/31/17

	
John Briggs

	
 $           25,000.00

	
04/24/12

	
  25,000

	
$3.00

	
04/24/12

	
03/31/17

	
Jeremy Feakins

	
 $         200,000.00

	
04/16/12

	
200,000

	
$3.00

	
04/16/12

	
03/31/17

	
Edward Baer

	
 $         100,000.00

	
04/13/12

	
100,000

	
$3.00

	
04/13/12

	
03/31/17

	
James Greenberg

	
 $         100,000.00

	
04/16/12

	
100,000

	
$3.00

	
04/16/12

	
03/31/17

	
Charles Baer

	
 $         100,000.00

	
04/01/12

	
100,000

	
$3.00

	
05/29/12

	
03/31/17

	
James Bernieri

	
 $           50,000.00

	
06/29/12

	
  50,000

	
$3.00

	
06/29/12

	
03/31/17

	
John Senft

	
 $           50,000.00

	
04/01/12

	
  50,000

	
$3.00

	
09/04/12

	
03/31/17

	
Essam El-Magrabi

	
 $           50,000.00

	
7/6/2012

	
  50,000

	
$3.00

	
07/06/12

	
03/31/17

	  	  	  	  	  	  	  
	  	
 $      1,075,000.00

	  	
1,075,000    

	  	  	  
	  	  	  	  	  	  	  

 

	Schedule

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