Document:

Blueprint

 

SECURITIES PURCHASE AGREEMENT

 

 

This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of May 22,
2018, by and between OCEAN THERMAL
ENERGY CORPORATION, a Nevada corporation, with headquarters
located at 800 South Queen Street, Lancaster, PA 17603 (the
“Company”), and COLLIER
INVESTMENTS, LLC, a California limited liability company,
with its address at 120 Birmingham Drive, Suite 230, Cardiff, CA
92007 (the “Buyer”).

 

WHEREAS:

 

A.            The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933
Act”);

 

B.            Buyer
desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement a 12%
convertible promissory note of the Company, in the form attached
hereto as Exhibit
A, in the aggregate principal amount of US$281,250.00
(together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the “Note”), convertible into
shares of common stock, nil par value per share, of the Company
(the “Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such Note.

 

C.            The
Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and

 

NOW THEREFORE, the Company and the Buyer
severally (and not jointly) hereby agree as follows:

 

1.            PURCHASE
AND SALE OF NOTE.

 

a.       Purchase
of Note. On the Closing Date (as defined below), the Company
shall issue and sell to the Buyer and the Buyer agrees to purchase
from the Company such principal amount of Note as is set forth
immediately below the Buyer’s name on the signature pages
hereto, subject to the express terms of the Note. The Company shall
issue to Buyer as a commitment fee, 400,000 shares of the
Company’s Common Stock (the “Initial Commitment
Shares”). The Aggregate Value shall mean 400,000 multiplied
by the closing price of the Company’s common stock on the
date of this Agreement (the “First Market Price”). The
Second Market Price shall mean the closing price of the
Company’s Common Stock on the Make-Whole Date (as defined
below). The Second Commitment Shares shall equal the Aggregate
Value divided by the Second Market Price, multiplied by 1.5, minus
the number of the Initial Commitment Shares. If the Second Market
Price as calculated on the date which is thirty trading days
following the six-month anniversary of the Issuance Date of the
Note (the “Make-Whole Date”) is lower than the First
Market Price, then the Company shall within two (2) business days
of the Buyer’s request, issue additional the Second
Commitment Shares as provided herein, however, Buyer’s
beneficial ownership cannot exceed 4.99% of the outstanding shares
of common stock at any time (pursuant to the specific calculations
of beneficial ownership as provided in the Note). The Initial
Commitment Shares and the Second Commitment Shares shall
collectively, in the aggregate, be referred to herein as the
“Commitment Shares”. Accordingly, the Second Commitment
Shares, if required to be issued pursuant to this Agreement, shall
be issued in accordance with such beneficial ownership limitations,
and in successive tranches if required to comply with such
beneficial ownership limitations (each an “Additional
Tranche”). The Company shall issue each Additional Tranche
within two (2) business days of the request by Buyer.

 

b.       Form
of Payment. On the Closing Date, the Buyer shall pay the
purchase price of $250,000.00 (the “Purchase Price”)
the Note, by wire transfer of immediately available funds, in
accordance with the Company’s written wiring instructions
against delivery, of the Note, pursuant to the terms of the
Note.

 

c.       Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the
date and time of the issuance and sale of the Note pursuant to this
Agreement (the “Closing Date”) shall be 5:00 P.M.,
Eastern Standard Time on or about May 22, 2018, or such other
mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by
the parties.

 

2.            REPRESENTATIONS
AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Company that:

 

a.       Investment
Purpose. As of the date hereof, the Buyer is purchasing the
Note and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Note (including, without limitation, such
additional shares of Common Stock, if any, as are issuable (i) on
account of interest on the Note or (ii) as a result of the events
described in Sections 1.3 and 1.4(g) of the Note, such shares of
Common Stock being collectively referred to herein as the
“Conversion Shares” and, collectively with the Note,
the “Securities”) for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act; provided, however, that by making the
representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the
1933 Act.

 

 

1

 

 

b.       Reliance
on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions
from the registration requirements of
United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.

 

c.       Information.
The Buyer and its advisors, if any, have been, and for so long as
the Note remain outstanding will continue to be, furnished with all
materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as
the Note remain outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
nonpublic information and will not disclose such information unless
such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor
any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree
of risk. The Buyer is not aware of any facts that may constitute a
breach of any of the Company's representations and warranties made
herein.

 

d.       Governmental
Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the
Securities.

 

e.       Transfer
or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933
Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Buyer, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under
the 1933 Act (or a successor rule) (“Rule 144”)) of the
Buyer who agrees to sell or otherwise transfer the Securities only
in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e)
the Securities are sold pursuant to Regulation S under the 1933 Act
(or a successor rule) (“Regulation S”), and the Buyer
shall have delivered to the Company, at the cost of the Buyer, an
opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which
opinion shall be accepted by the Company; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is
not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such Securities under the 1933 Act
or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case).
Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in
connection with a bona
fide margin account or other lending
arrangement.

 

f.       Legends.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):

 

 

2

 

 

“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED

(I)
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”

 

 

The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to
Section 3.2 of the Note.

 

g.       Authorization;
Enforcement. This Agreement has been duly and validly
authorized. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes a valid and
binding agreement of the Buyer enforceable in accordance with its
terms.

 

3.            REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Buyer that:

 

a.       Organization
and Qualification. The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned,
leased, used, operated and conducted. Schedule 3(a) sets forth a
list of all of the Subsidiaries of the Company and the jurisdiction
in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect. “Material Adverse Effect”
means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. “Subsidiaries”
means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.

 

 

3

 

 

b.       Authorization;
Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this
Agreement, the Note by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and
such authorized representative is the true and official
representative with authority to sign this Agreement and the other
documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.

 

c.       Capitalization.
Except as disclosed in the SEC Documents, no shares are reserved
for issuance pursuant to the Company’s stock option plans, no
shares are reserved for issuance pursuant to securities (other than
the Note) exercisable for, or convertible into or exchangeable for
shares of Common Stock and sufficient shares are reserved for
issuance upon conversion of the Note (as required by the Note and
transfer agent share reserve letter). All of such outstanding
shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and non-assessable. No
shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in the SEC
Documents, as of the effective date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company’s Certificate of Incorporation as in effect on
the date hereof (“Certificate of Incorporation”), the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this
representation signed by the Company’s Chief Executive on
behalf of the Company as of the Closing Date.

 

d.       Issuance
of Shares. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Note in
accordance with its respective terms, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.

 

 

e.       Acknowledgment
of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company
further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with
this Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.

 

 

4

 

 

f.       No
Conflicts. The execution, delivery and performance of this
Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTCBB, OTCQX, OTCQB, OTC Pink, the
Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap
Market (“Nasdaq SmallCap”), the New York Stock Exchange
(“NYSE”), the NYSE American, or any equivalent
replacement exchange or quotation system (as applicable at the
time, the “Principal
Trading Market”), and does not reasonably anticipate that the
Common Stock will be delisted by the Principal Trading Market in
the foreseeable future. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any
of the foregoing.

 

g.       SEC
Documents; Financial Statements. The Company has timely
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits
to such documents) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”).
The Company has delivered to the Buyer true and complete copies of
the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and
the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. None of the statements made in any such
SEC Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof). As
of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with United
States generally accepted accounting principles, consistently
applied, during the periods involved and fairly present in all
material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business, and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in
the aggregate, are not material to the financial condition or
operating results of the Company. The Company is subject to the
reporting requirements of the 1934 Act. For the avoidance of doubt,
filing of the documents required in this Section 3(g) via the
SEC’s Electronic Data Gathering, Analysis, and Retrieval
system (“EDGAR”) shall satisfy all delivery
requirements of this Section 3(g).

 

 

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h.       Absence
of Certain Changes. There have been no material adverse
change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition,
results of operations, prospects or 1934 Act reporting status of
the Company or any of its Subsidiaries.

 

i.       Absence
of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or,
to the knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and
its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

 

j.       Patents,
Copyrights, etc. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights (“Intellectual
Property”) necessary to enable it to conduct its business as
now operated (and, as presently contemplated to be operated in the
future); Except as disclosed in the SEC Documents, there is no
claim or action by any person pertaining to, or proceeding pending,
or to the Company’s knowledge threatened, which challenges
the right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its
business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current
and intended products, services and processes do not infringe on
any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual
Property.

 

k.       No
Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company’s officers
has or is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company’s
officers has or is expected to have a Material Adverse
Effect.

 

l.       Tax
Status. The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to
which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of the Company’s tax returns is presently being
audited by any taxing authority.

 

m.           Certain
Transactions. Except for arm’s length transactions
pursuant to which the Company or any of its Subsidiaries makes
payments in the ordinary course of business upon terms no less
favorable than the Company or any of its Subsidiaries could obtain
from third parties and other than the grant of stock options
disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.

 

n.       Disclosure.
All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Buyer
pursuant to Section 2(d) hereof and otherwise in connection with
the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed
under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).

 

 

6

 

 

o.       Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of arm’s length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated
hereby and any statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer’ purchase of the
Securities. The Company further represents to the Buyer that the
Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.

 

p.       No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or
its securities.

 

q.       No
Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or
the transactions contemplated hereby.

 

r.       Permits;
Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the “Company Permits”), and
there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have
a Material Adverse Effect.

 

s.       Environmental
Matters.

 

(i)               There
are, to the Company’s knowledge, with respect to the Company
or any of its Subsidiaries or any predecessor of the Company, no
past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company’s knowledge, threatened in connection with any of
the foregoing. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”)

into
the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.

 

(ii)               Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company’s or any of its Subsidiaries’
business.

 

(iii)               There
are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.

 

t.       Title
to Property. Except as disclosed in the SEC Documents the
Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.

 

 

7

 

 

u.       Internal
Accounting Controls. Except as disclosed in the SEC
Documents the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company’s board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

 

 

v.       Foreign
Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to
any foreign or domestic
government official or employee from corporate funds; violated or
is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or
employee.

 

w.           Solvency.
The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair
market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after
giving effect to the transaction contemplated by this Agreement,
have the ability to, nor does it intend to take any action that
would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. The Company
did not receive a qualified opinion from its auditors with respect
to its most recent fiscal year end and, after giving effect to the
transactions contemplated by this Agreement, does not anticipate or
know of any basis upon which its auditors might issue a qualified
opinion in respect of its current fiscal year. For the avoidance of
doubt any disclosure of the Borrower’s ability to continue as
a “going concern” shall not, by itself, be a violation
of this Section 3(w).

 

x.       No
Investment Company. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required
to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by
an Investment Company.

 

y.       Insurance.
Upon written request the Company will provide to the Buyer true and
correct copies of all policies relating to directors’ and
officers’ liability coverage, errors and omissions coverage,
and commercial general liability coverage, if any.

 

z.       Breach
of Representations and Warranties by the Company. If the
Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available
to the Buyer pursuant to this Agreement, it will be considered an
Event of Default under Section 3.4 of the Note.

 

 

8

 

 

4.            COVENANTS.

 

a.       Best
Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 6 and 7 of this Agreement.

 

b.       Use
of Proceeds. The Company shall use the proceeds from the
sale of the Note for working capital and other general corporate
purposes and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with
its currently existing direct or indirect
Subsidiaries).

 

c.       Financial
Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:

(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).

 

d.       Listing.
The Company shall promptly secure the listing of the Conversion
Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long
as the Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion
of the Note. The Company will obtain and, so long as the Buyer owns
any of the Securities, maintain the listing and trading of its
Common Stock on the Principal Trading Market and will comply in all
respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Financial Industry
Regulatory Authority (“FINRA”) and such exchanges, as
applicable. The Company shall promptly provide to the Buyer copies
of any material notices it receives from the Principal Trading
Market and any other exchanges or quotation systems on which the
Common Stock is then listed regarding the continued eligibility of
the Common Stock for listing on such exchanges and quotation
systems.

 

e.       Corporate
Existence. So long as the Buyer beneficially owns any Note,
the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the
surviving or successor entity in such transaction (i) assumes the
Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for
trading on the Principal Trading Market

 

f.       No
Integration. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or
sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.

 

g.       Failure
to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.

 

h.       Trading
Activities. Neither the Buyer nor its affiliates has an open
short position (or other hedging or similar transactions) in the
common stock of the Company and the Buyer agree that it shall not,
and that it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the common stock
of the Company.

 

i.       Breach
of Covenants. If the Company breaches any of the covenants
set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an event of default under Section 3.3 of the
Note.

 

5.            Transfer
Agent Instructions. Prior to registration of the Conversion
Shares under the 1933 Act or the date on which the Conversion
Shares may be sold pursuant to Rule 144 without any restriction as
to the number of Securities as of a particular date that can then
be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that: (i) no stop transfer instructions to give
effect to Section 2(f) hereof (in the case of the Conversion
Shares, prior to registration of the Conversion Shares under the
1933 Act or the date on which the Conversion Shares may be sold
pursuant to Rule 144 without any restriction as to the number of
Securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this
Agreement and the Note; (ii) it will not direct its transfer agent
not to transfer or delay, impair, and/or hinder its transfer agent
in transferring (or issuing) (electronically or in certificated
form) any certificate for Conversion Shares to be issued to the
Buyer upon conversion of or otherwise pursuant to the Note as and
when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any
Conversion Shares issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and
this Agreement. Nothing in this Section shall affect in any way the
Buyer’s obligations and agreement set forth in Section 2(g)
hereof to comply with all applicable prospectus delivery
requirements, if any, upon re-sale of the Securities. If the Buyer
provides the Company, at the cost of the Buyer, with (i) an opinion
of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under
the 1933 Act and such sale or transfer is effected or (ii) the
Buyer provides reasonable assurances that the Securities can be
sold pursuant to Rule 144, the Company shall permit the transfer,
and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as
specified by the Buyer. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
Buyer, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section
may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section,
that the Buyer shall be entitled, in addition to all other
available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.

 

 

9

 

 

6.            CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The
obligation of the Company hereunder to issue and sell the Note to
the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its
sole discretion:

 

a.       The
Buyer shall have executed this Agreement and delivered the
same to the
Company.

 

b.       The
Buyer shall have delivered the Purchase Price in accordance
with Section 1(b)
above.

 

c.       The
representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.

 

d.       No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.

 

7.            CONDITIONS
PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The
obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived
by the Buyer at any time in its sole discretion:

 

a.       The
Company shall have executed this Agreement and delivered the
same to
the Buyer.

 

b.       The
Company shall have delivered to the Buyer duly executed Note (in
such denominations as the Buyer shall request) in accordance with
Section 1(b) above.

 

c.       The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall
have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have
received a certificate or certificates, executed by the chief
executive officer of the Company, dated as of the Closing Date, to
the foregoing effect and as to such other matters as may be
reasonably requested by the Buyer including, but not limited to
certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions
relating to the transactions contemplated hereby.

 

d.       No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.

 

e.       No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.

 

f.       The
Conversion Shares shall have been authorized for quotation on the
Principal Trading Market or any similar quotation system and
trading in the Common Stock on the Principal Trading Market or any
similar quotation system shall not have been suspended by the SEC,
the Principal Trading Market, or any similar quotation
system.

 

g.       The
Buyer shall have received an officer’s certificate described
in Section 3(c) above, dated as of the Closing Date.

 

 

10

 

 

8.            GOVERNING
LAW; MISCELLANEOUS.

 

a.       Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state or federal courts of
San Diego County, California. The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any
action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. The Company and
Buyer waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not
affect
the validity or enforceability of any other provision of any
agreement. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.

 

b.       Counterparts;
Signatures by Facsimile. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

 

c.       Headings.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.

 

d.       Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.

 

e.       Entire
Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the majority in interest of the
Buyer.

 

f.       Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to
be received), or the first business
day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall
be:

 

If to
the Company, to:

 

OCEAN
THERMAL ENERGY CORPORATION

800
South Queen Street Lancaster, PA 17603

E-mail:
info@otecorporation.com

 

If to
the Holder, to:

 

COLLIER
INVESTMENTS, LLC

120
Birmingham Drive, Suite 230

Cardiff, CA
92007

E-mail:
dclark@vci.us.com

 

Each
party shall provide notice to the other party of any change in
address.

 

 

11

 

 

g.       Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to
Section 2(f), the Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from the
Buyer or to any of its “affiliates,” as that term is
defined under the 1934 Act, without the consent of the
Company.

 

h.       Third
Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.

 

i.       Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder. The Company agrees to indemnify and hold
harmless the Buyer and all their officers, directors, employees and
agents for loss or damage arising as a result of or related to any
breach by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.

 

 

j.       Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

k.       No
Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be
applied against any party.

 

l.       Remedies.

 

(i)            The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required.

 

(ii)            In
addition to any other remedy provided herein or in any document
executed in connection herewith, Borrower shall pay Holder for all
costs, fees and expenses in connection with any litigation,
contest, dispute, suit or any other action to enforce any rights of
Holder against Borrower in connection herewith, including, but not
limited to, costs and expenses and attorneys' fees, and costs and
time charges of counsel to Holder. In furtherance of the foregoing,
Borrower shall pay an amount equal to $25,000 to the Holder
immediately upon the Holder’s filing of any litigation,
contest, dispute, suit or any other action to enforce any rights of
Holder against Borrower in connection herewith, which such amount
shall be used to pay Holder’s attorneys’ fees, cost and
expenses. Additional amounts shall be paid by Borrower to Holder
immediately upon Borrower’s receipt of invoices from
Holder’s attorney evidencing the charges and fees assessed in
connection with any such litigation, contest, dispute, suit or any
other action to enforce any rights of Holder and, upon receiving
such invoices which indicate outstanding fees in excess of $20,000
at any time, Borrower shall promptly pay an additional $25,000 to
Holder to be used in satisfaction of additional attorneys’
fees, and costs and time charges of counsel to Holder. Such
payments shall continue indefinitely until said litigation,
contest, dispute, suit or any other action to enforce any rights of
Holder against Borrower is settled to the satisfaction of the
Holder. Further, Borrower agrees to save and hold Holder harmless
from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such costs
and expenses.

 

m.           Publicity.
The Company, and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases,
SEC, Principal Trading Market, or FINRA filings, or any other
public statements with respect to the transactions contemplated
hereby; provided,
however, that the
Company shall be entitled, without the prior approval of the Buyer,
to make any press release or SEC, Principal Trading Market, or
FINRA filings with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy
thereof).

 

[ -
signature page follows - ]

 

12

 

 

IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.

 

 

	

 

	
OCEAN
THERMAL ENERGY CORPORATION

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ Jeremy P. Feakins

	

 

	

 

	

 

	
Name: Jeremy P. Feakins

	

 

	

 

	

 

	Title: Chief Executive
Officer
	

 

 

 

	

 

	
COLLIER INVESTMENTS,
LLC

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ David Clark

	

 

	

 

	

 

	
Name: David Clark

	

 

	

 

	

 

	

Title:
Principal

	

 

 

 

AGGREGATE
SUBSCRIPTION AMOUNT:

 

Aggregate Principal
Amount of
Note:                                                                                                            

US$281,250.00

 

Aggregate Purchase
Price:                                                                                                            

US$250,000.00

 

13NEITHER THIS
NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE
BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.

 

OCEAN
THERMAL ENERGY CORPORATION

 

CONVERTIBLE NOTE

 

	
Issuance Date: May 22, 2018

	
Original Principal
Amount:$281,250

	
Note No. CPWR-1

	
Consideration Paid at Close:
$250,000

 

FOR VALUE RECEIVED, Ocean Thermal Energy
Corporation, a Nevada corporation with a par value of $0.001
per common share (“Par Value”) (the "Company"), hereby promises to
pay to the order of Collier
Investments, LLC or registered assigns (the "Holder") the amount set out
above as the Original Principal Amount (as reduced pursuant to the
terms hereof pursuant to redemption, conversion or otherwise, the
"Principal") when
due, whether upon the Maturity Date (as defined below),
acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest ("Interest") on any outstanding
Principal at the applicable Interest Rate from the date set out
above as the Issuance Date (the "Issuance Date") until the same
becomes due and payable, upon the Maturity Date or acceleration,
conversion, redemption or otherwise (in each case in accordance
with the terms hereof).

 

The Original Principal Amount is
$281,250 plus accrued and unpaid interest and any other fees. The
Consideration is $250,000 payable by wire transfer (there exists a
$31,250 original issue discount (the “OID”)). The
Holder shall pay $250,000 of Consideration upon closing of this
Note. For purposes hereof, the term “Outstanding
Balance” means the Original Principal Amount, as reduced or
increased, as the case may be, pursuant to the terms hereof for
conversion, breach hereof or otherwise, plus any accrued but unpaid
interest, collection and enforcements costs, and any other fees,
penalties, damages or charges incurred under this
Note.

 

	
 

	
(1)

	
GENERAL TERMS

 

(a)       Payment
of Principal. The "Maturity Date" shall be the
earlier of (i) seven (7) months after the Issuance Date or (ii) the
date in which the Company consummates a capital raising transaction
in the amount of $6,000,000.00 or more primarily from the sale of
equity of the Company (the “Qualified Financing”), as
may be extended at the option of the Holder in the event that, and
for so long as, an Event of Default (as defined below) shall not
have occurred and be continuing on the Maturity Date (as may be
extended pursuant to this Section 1) or any event shall not have
occurred and be continuing on the Maturity Date (as may be extended
pursuant to this Section 1) that with the passage of time and the
failure to cure would result in an Event of
Default.

 

 

1

 

 

(b)       Interest.
A one-time interest charge of twelve percent (12%)
(“Interest
Rate”) shall be applied on the Issuance Date to the
Outstanding Balance. Interest hereunder shall be paid on the
Maturity Date (or sooner as provided herein) to the Holder or its
assignee in whose name this Note is registered on the records of
the Company regarding registration and transfers of Notes in cash
or converted into
Common Stock at the Conversion Price provided the Equity Conditions
are satisfied.

 

(c)       Security.
This Note shall be secured by collateral and assets of the Company,
as further provided in that certain security agreement entered into
on the Issuance Date by the Company and
Holder.

 

	
 

	
(2)

	
EVENTS OF
DEFAULT.

 

(a)       An
“Event of
Default”, wherever used herein, means any one of the
following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental
body):

 

(i)       The
Company's failure to pay to the Holder any amount of Principal,
Interest, or other amounts when and as due under this Note
(including, without limitation, the Company's failure to pay any
redemption payments or amounts
hereunder);

 

(ii)       A
Conversion Failure as defined in section
3(b)(ii)

 

(iii)       The
Company or any subsidiary of the Company shall commence, or there
shall be commenced against the Company or any subsidiary of the
Company under any applicable bankruptcy or insolvency laws as now
or hereafter in effect or any successor thereto, or the Company or
any subsidiary of the Company commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to the
Company or any subsidiary of the Company or there is commenced
against the Company or any subsidiary of the Company any such
bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 61 days; or the Company or any
subsidiary of the Company is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or the Company or any subsidiary of the
Company suffers any appointment of any custodian, private or court
appointed receiver or the like for it or any substantial part of
its property which continues undischarged or unstayed for a period
of sixty one (61)       days;
or the Company or any subsidiary of the Company makes a general
assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that it
is unable to pay, or shall be unable to pay, its debts generally as
they become due; or the Company or any subsidiary of the Company
shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or the
Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other
action is taken by the Company or any subsidiary of the Company for
the purpose of effecting any of the foregoing;

 

(iv)       The
Company or any subsidiary of the Company shall default in any of
its obligations under any other Note or any mortgage, credit
agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or
by which there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the
Company in an amount exceeding $100,000, whether such indebtedness
now exists or shall hereafter be created;
and 

 

 

2

 

 

(v)       The
Common Stock is suspended or delisted for trading on the Over the
Counter OTCQB Venture Marketplace or OTCPink Open Marketplace (the
“Primary
Market”).

 

(vi)       The
Company loses its ability to deliver shares via
“DWAC/FAST” electronic
transfer.

 

(vii)       The
Company loses its status as “DTC
Eligible.”

 

(viii)       The
Company shall become late or delinquent in its filing requirements
as a fully-reporting issuer registered with the Securities &
Exchange Commission.

 

(ix)       The
Company shall fail to reserve and keep available out of its
authorized Common Stock a number of shares equal to at least 3
(three) times the full number of shares of Common Stock issuable
upon conversion of all outstanding amounts under this
Note.

 

(x)       The
Company shall fail to meet all requirements to satisfy the
availability of Rule 144 to the Investor or its assigns including
but not limited to timely fulfillment of its filing requirements as
a fully-reporting issuer registered with the SEC, requirements for
XBRL filings, and requirements for disclosure of financial
statements on its website.

 

(xi)       The
Common Stock trades at less than $0.02 per share at any time while
the Note is outstanding.

 

(b)       Upon
the occurrence of any Event of Default (without the need for any
party to give any notice or take any other action), the Outstanding
Balance shall immediately and automatically increase to 130% of the
Outstanding Balance immediately prior to the occurrence of the
Event of Default (the “Default Sum”), and the
Conversion Price shall be redefined to equal the lesser of (a) 80%
multiplied by the price per share paid by the investors in the
Qualified Financing or (b) $0.20, subject to adjustment as provided
in this Note. Upon the occurrence of any Event of Default, the Note
shall become immediately due and payable and the Company shall pay
to the Holder, in full satisfaction of its obligations hereunder,
an amount equal to the Outstanding Balance, all without demand,
presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, legal fees
and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in
equity.

 

(3) CONVERSION OF NOTE. This Note
shall be convertible into shares of the Company's Common Stock, on
the terms and conditions set forth in this Section
3.

 

(a)       Conversion
Right. Subject to the provisions of Section 3(c), at any
time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid
Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section
3(b), at the Conversion Price (as defined below). The number of
shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to this Section 3(a) shall be equal to the quotient
of dividing the Conversion Amount by the Conversion Price. The
Company shall not issue any fraction of a share of Common Stock
upon any conversion. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all transfer agent fees, legal
fees, costs and any other fees or costs that may be incurred or
charged in connection with the issuance of shares of the
Company’s Common Stock to the Holder arising out of or
relating to the conversion of this Note.

 

 

3

 

 

(i)       "Conversion
Amount" means the portion of the Original Principal Amount
and Interest to be converted, plus any penalties, redeemed or
otherwise with respect to which this determination is being
made.

 

(ii)       "Conversion
Price" shall equal the lesser of (i) 80% multiplied by the
price per share paid by the investors in the Qualified Financing or
(ii) $0.20, subject to adjustment as provided in this Note, subject
to adjustment as provided in this Note.

 

(b)       Mechanics
of Conversion.

 

(i)       Optional
Conversion. To convert any Conversion Amount into shares of
Common Stock on any date (a "Conversion Date"), the Holder
shall (A) transmit by email, facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., New York, NY Time, on such date,
a copy of an executed notice of conversion in the form attached
hereto as Exhibit
A (the "Conversion
Notice") to the Company. On or before the third Business Day
following the date of receipt of a Conversion Notice (the
"Share Delivery
Date"), the Company shall (A) if legends are not required to
be placed on certificates of Common Stock pursuant to the then
existing provisions of Rule 144 of the Securities Act of 1933
(“Rule 144”) and provided that the Transfer Agent is
participating in the Depository Trust Company's ("DTC") Fast Automated
Securities Transfer Program, credit such aggregate number of shares
of Common Stock to which the Holder shall be entitled to the
Holder's or its designee's balance account with DTC through its
Deposit Withdrawal Agent Commission system or (B) if the Transfer
Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the address as specified in
the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled which certificates shall not
bear any restrictive legends unless required pursuant the Rule 144.
If this Note is physically surrendered for conversion and the
outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Company
shall, upon request of the Holder, as soon as practicable and in no
event later than three (3) Business Days after receipt of this Note
and at its own expense, issue and deliver to the holder a new Note
representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the record holder or holders of such shares of Common Stock upon
the transmission of a Conversion Notice.

 

(ii)       Company's
Failure to Timely Convert. If within two (2) Trading Days
after the Company's receipt of the facsimile or email copy of a
Conversion Notice the Company shall fail to issue and deliver to
Holder via “DWAC/FAST” electronic transfer the number
of shares of Common Stock to which the Holder is entitled upon such
holder's conversion of any Conversion Amount (a "Conversion Failure"), the
Original Principal Amount of the Note shall increase by $2,000 per
day until the Company issues and delivers a certificate to the
Holder or credit the Holder's balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled
upon such holder's conversion of any Conversion Amount (under
Holder’s and Company’s expectation that any damages
will tack back to the Issuance Date). Company will not be subject to any penalties
once its transfer agent processes the shares to the DWAC
system. If the Company fails to deliver shares in accordance
with the timeframe stated in this Section, resulting in a
Conversion Failure, the Holder, at any time prior to selling all of
those shares, may rescind any portion, in whole or in part, of that
particular conversion attributable to the unsold shares and have
the rescinded conversion amount returned to the Outstanding Balance
with the rescinded conversion shares returned to the Company (under
Holder’s and Company’s expectations that any returned
conversion amounts will tack back to the original date of the
Note).

 

(iii)       [Intentionally
Omitted].

 

 

4

 

 

In the case that conversion
shares are not deliverable by DWAC/FAST electronic transfer an
additional 10% discount to the Conversion Price will
apply.

 

(iv)       [Intentionally
Omitted].

 

(v)       [Intentionally
Omitted].

 

(vi)       Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon
conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender
this Note to the Company unless (A) the full Conversion Amount
represented by this Note is being converted or (B) the Holder has
provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note
upon physical surrender of this Note. The Holder and the Company
shall maintain records showing the Principal and Interest converted
and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon
conversion.

 

	
 

	
(c)

	
Limitations on Conversions or
Trading.

 

(i)       Beneficial
Ownership. The Company shall not effect any conversions of
this Note and the Holder shall not have the right to convert any
portion of this Note or receive shares of Common Stock
as payment of interest hereunder to the extent that after giving
effect to such conversion or receipt of such interest payment, the
Holder, together with any affiliate thereof, would beneficially own
(as determined in accordance with Section 13(d) of the Exchange Act
and the rules promulgated thereunder) in excess of 4.99% of the
number of shares of Common Stock outstanding immediately after
giving effect to such conversion or receipt of shares as payment of
interest. Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the
time of a conversion hereunder, unless the conversion at issue
would result in the issuance of shares of Common Stock in excess of
4.99% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder
or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this
Section will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation contained in
this Section applies, the determination of which portion of the
principal amount of this Note is convertible shall be the
responsibility and obligation of the Holder. If the Holder has
delivered a Conversion Notice for a principal amount of this Note
that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the conversion for the
maximum principal amount permitted to be converted on such
Conversion Date in accordance with Section 3(a) and, any principal
amount tendered for conversion in excess of the permitted amount
hereunder shall remain outstanding under this Note. In the event
that the Market Capitalization of the Company falls below
$2,500,000, the term “4.99%” above shall be permanently
replaced with “9.99%”. “Market
Capitalization” shall be defined as the product of (a) the
closing price of the Common Stock of the Common stock multiplied by
(b) the number of shares of Common Stock outstanding as reported on
the Company’s most recently filed Form 10-K or Form
10-Q.

 

(ii)       Capitalization.
So long as this as this Note is outstanding, upon written request
of the Holder, the Company shall furnish to the Holder the
then-current number of common shares issued and outstanding, the
then-current number of common shares authorized, and the
then-current number of shares reserved for third
parties.

 

	
 

	
(d)

	
Other Provisions.

 

 

5

 

 

(i)       Share
Reservation. The Company shall at all times reserve
and keep available out of its authorized Common Stock a number of
shares equal to at least

 

5 (five) times the full number of shares of
Common Stock issuable upon conversion of all outstanding amounts
under this Note; and within 3 (three) Business Days following the
receipt by the Company of a Holder's notice that such minimum
number of shares of Common Stock is not so reserved, the Company
shall promptly reserve a sufficient number of shares of Common
Stock to comply with such requirement. The Company will at all
times reserve at least 4,725,000 shares of Common Stock for
conversion.

 

(ii)       Prepayment.
At any time within the 90 day period immediately following the
Issuance Date, the Company shall have the option, upon 10 business
days’ notice to Holder, to pre-pay the entire remaining
outstanding principal amount of this Note in cash, provided that
(i) the Company shall pay the Holder 145% of the Outstanding
Balance, (ii) such amount must be paid in cash on the next business
day following such 10 business day notice period, and (iii) the
Holder may still convert this Note pursuant to the terms hereof at
all times until such prepayment amount has been received in full.
Except as set forth in this Section the Company may not prepay this
Note in whole or in part.

 

(iii)       Terms
of Future Financings. So long as this Note is outstanding,
upon any issuance by the Company or any of its subsidiaries of any
security (or upon any amendment to any existing security) with any
term more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly
provided to the Holder in this Note, then the Company shall notify
the Holder of such additional or more favorable term and such term,
at Holder’s option, shall become a part of the Note. The
types of terms contained in another security that may be more
favorable to the holder of such security include, but are not
limited to, terms addressing conversion discounts, conversion
lookback periods, interest rates, original issue discounts, stock
sale price, private placement price per share, and warrant
coverage.

 

(iv)       All
calculations under this Section 3 shall be rounded up to the
nearest $0.00001 or whole share.

 

(v)       Nothing
herein shall limit a Holder's right to pursue actual damages or
declare an Event of Default pursuant to Section 2 herein for the
Company's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available
to it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief, in each case
without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

 

(vi)       If
the Company, at any time while this Note or any amounts due
hereunder are outstanding, issues, sells or grants any option to
purchase, or sells or grants any right to reprice, or otherwise
disposes of, or issues (or has sold or issued, as the case may be,
or announces any sale, grant or any option to purchase or other
disposition), any Common Stock or other securities convertible
into, exercisable for, or otherwise entitle any person or entity
the right to acquire, shares of Common Stock (including, without
limitation, upon conversion any convertible notes or warrants
outstanding as of or following the Issuance Date), in each or any
case at an effective price per share that is lower than the then
Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive
Issuance”) (it being agreed that if the holder of the Common
Stock or other securities so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in
connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share that is lower than the
Conversion Price, such issuance shall 

 

 

6

 

 

be deemed to have occurred for
less than the Conversion Price on such date of the Dilutive
Issuance), then the Conversion Price shall be reduced, at the
option of the Holder, to a price equal the Base Conversion
Price.

 

(4)       SECTION
3(A)(9) OR 3(A)(10) TRANSACTION. So long as this Note is
outstanding, the Company shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the
Securities Act (a “3(a)(9) Transaction”) or Section
3(a)(10) of the Securities Act (a “3(a)(10)
Transaction”). In the event that the Company does enter into,
or makes any issuance of Common Stock related to a 3(a)(9)
Transaction or a 3(a)(10) Transaction while this note is
outstanding, a liquidated damages charge of 25% of the outstanding
principal balance of this Note, but not less than $25,000, will be
assessed and will become immediately due and payable to the Holder
at its election in the form of cash payment or addition to the
balance of this Note.

 

(5)       PIGGYBACK
REGISTRATION RIGHTS. The Company shall include on the next
registration statement the Company files with SEC (or on the
subsequent registration statement if such registration statement is
withdrawn) all shares issuable upon conversion of this Note.
Failure to do so will result in liquidated damages of 25% of the
outstanding principal balance of this Note, but not less than
$25,000, being immediately due and payable to the Holder at its
election in the form of cash payment or addition to the balance of
this Note.

 

(6)       REISSUANCE
OF THIS NOTE.

 

(a)       Assignability.
The Company may not assign this Note. This Note will be binding
upon the Company and its successors and will inure to the benefit
of the Holder and its successors and assigns and may be assigned by
the Holder to anyone of its choosing without Company’s
approval.

 

(b)       Lost,
Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note
representing the outstanding Principal.

 

(7)       NOTICES.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and
will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party)
(iii) upon receipt, when sent by email; or (iv) one (1) Trading Day
after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such
communications shall be those set forth in the communications and
documents that each party has provided the other immediately
preceding the issuance of this Note or at such other address and/or
facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each
other party three (3) Business Days prior to the effectiveness of
such change. Written confirmation of receipt (i) given by the
recipient of such notice, consent, waiver or other communication,
(ii) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (iii)
provided by a nationally recognized overnight delivery service,
shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.

 

 

 

 

The addresses for such
communications shall be:

 

If to the Company,
to:

 

OCEAN THERMAL
ENERGY CORPORATION

800 South Queen Street Lancaster,
PA 17603

E-mail: info@otecorporation.com

 

If to the
Holder:

 

COLLIER
INVESTMENTS, LLC

120 Birmingham Drive, Suite
230

Cardiff, CA
92007

Attn: David Clark, Principal
Email:  dclark@vci.us.com

 

 

8

 

 

(8)       APPLICABLE
LAW AND VENUE. This Note shall be governed by and construed
in accordance with the laws of the State of Nevada, without giving
effect to conflicts of laws thereof. Any action brought by either
party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of
California or in the federal courts located in the city and county
of San Diego, in the State of California. Both parties and the
individuals signing this Agreement agree to submit to the
jurisdiction of such courts.

 

(9)       WAIVER.
Any waiver by the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of
this Note. The failure of the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall
not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Note. Any waiver must be in
writing.

 

(10)       LIQUIDATED
DAMAGES. Holder and Company agree that in the event Company
fails to comply with any of the terms or provisions of this Note,
Holder's damages would be uncertain and difficult (if not
impossible) to accurately estimate because of the parties'
inability to predict future interest rates, future share prices,
future trading volumes and other relevant factors. Accordingly,
Holder and Company agree that any fees, balance adjustments,
default interest or other charges assessed under this Note are not
penalties but instead are intended by the parties to be, and shall
be deemed, liquidated damages (under Holder's and Company's
expectations that any such liquidated damages will tack back to the
Closing Date for purposes of determining the holding period under
Rule 144).

 

(11)       ADJUSTMENTS.
Notwithstanding anything to the contrary, any references herein to
share numbers or share prices shall be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar
transaction during such period.

 

(12)       QUALIFIED
FINANCING. If the Company fails to consummate a Qualified
Financing on or before September 1, 2018, then a liquidated damages
charge of $56,250.00 shall be immediately added to the
balance of this Note.

 

[Signature
Page Follows]

 

 

9

 

	
 

 

IN WITNESS WHEREOF, the
Company has caused this Convertible Note to be duly executed by a
duly authorized officer as of the date set forth
above.

 

 

	

 

	
OCEAN THERMAL ENERGY
CORPORATION

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ Jeremy P. Feakins

	

 

	

 

	

 

	Name:
Jeremy P. Feakins
	

 

	

 

	

 

	

Title: Chief
Executive Officer

	

 

 

 

	

 

	
 COLLIER
INVESTMENTS, LLC.

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ David Clark

	

 

	

 

	

 

	
Name: David Clark 

	

 

	

 

	

 

	

Title:
Principal

	

 

 

[Signature Page to Convertible Note No.
CPWR-1]

 

 

10

 

	
EXHIBIT A

	
CONVERSION NOTICE

	
[Company Contact,
Position]

	
Ocean Thermal Energy
Corporation

	
[Company
Address]

	
[Contact Email
Address}

	

 

The undersigned hereby elects to
convert a portion of the $                 
Convertible Note           
         issued to Collier
Investments, LLC on                  
into Shares of Common Stock of                      
according to the conditions set forth in such Note as of the date
written below.

 

	
By accepting this notice of
conversion, you are acknowledging that the number of shares to be
delivered represents less than 10% (ten percent) of the common
stock outstanding. If the number of shares to be delivered
represents more than 9.99% of the common stock outstanding, this
conversion notice shall immediately automatically extinguish and
debenture Holder must be immediately notified.

 

	
Date of Conversion:

	
_______________________________

	
Conversion Amount:

	
_______________________________

	
Conversion Price:

	_______________________________
	
Shares to be Delivered: 

	
Shares delivered in name
of:

 

	
COLLIER INVESTMENTS,
LLC

	

 

 

Signature:                                                                                  
_______________________________

	
By:

Title:

	
Collier Investments,
LLC

 

11

 

	
EXHIBIT B

	
TRUE-UP NOTICE

	
[Company Contact,
Position]

	
Ocean Thermal Energy
Corporation

	
[Company
Address]

	
[Contact Email
Address}

 

The undersigned hereby gives
notice to Ocean Thermal Energy
Corporation, a corporation (the
“Company”), pursuant to that certain Note
dated , 20 by
and between the Company and the Holder (the “Note”),
that the Holder elects to:

 

__

Receive fully paid and
non-assessable True-Up Shares pursuant to Section 3(b)(v) of the
Note (such Additional Origination Shares shall be calculated as set
forth below), or

 

__

Add to the Outstanding Balance a
dollar amount equal to the True-Up Amount (such True-Up Amount
shall be calculated as set forth below).

 

The number of True-Up Shares
Holder is entitled to receive is calculated as
follows:

 

Conversion Amount ($__) / __% of
the lowest trade occurring during the                 
(__) consecutive Trading Days immediately preceding the applicable
Conversion Date ($__.__ ) - Conversion Amount ($__ ) divided by the
Par Value ($__.__) =

 

   
           ____________
True-Up Shares

 

The amount of True-Up Balance to
be added to the Outstanding Balance is calculated as
follows:

 

Number of True-Up Shares ( ) *
high trade price on the Conversion Date ($_. )=

 

   
           ____________
True-Up Shares

 

	
Shares delivered in name
of:

 

	
COLLIER INVESTMENTS,
LLC

	

 

                                                                                            Signature:   
________________________

	
By:

Title:

	
Collier Investments,
LLC

 

 

 12

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