Document:

ex1002form10.htm

      

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made this 1st day of October, 2010, by and between:

JPF VENTURE FUND 1, LP, a Pennsylvania limited partnership, with a registered address of 800 South Queen Street, Lancaster, PA 17603 (hereinafter “Landlord”)

and

OCEES INTERNATIONAL, INC., a Hawaii corporation, and OCEAN THERMAL ENERGY CORPORATION, a Delaware corporation (hereinafter “Tenants”).

WITNESSETH:

1.             GRANT AND PREMISES. In consideration of the payment of rent and the performance of the covenants and agreements herein contained, for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, Landlord hereby leases to Tenants and Tenants hereby lease from Landlord that certain real estate, together with the improvements erected thereon (“Improvements”) in Lancaster County, Pennsylvania, and more particularly described as 800 South Queen Street, Lancaster, PA 17603 (the “Premises”).

2.             TERM. The term of this Lease (the “Term”) shall commence on October 1, 2010 (the “Commencement Date”) and shall end at midnight on the last day of the month containing the fifth (5th) anniversary of the Commencement Date unless the Commencement Date is the first day of a month, in which case, on the last day of the month prior to the fifth (5th) anniversary of the Commencement Date. In addition, the Term may be extended for two (2) additional five (5) year terms if Tenants are not then in default of this Lease, and if the Lease is not terminated by either party by delivering sixty (60) days written notice to the other party prior to the expiration of the initial term or any renewal thereof (the renewal option shall hereinafter be referred to as a “Renewal Term”). In a Renewal Term, all the terms and conditions of this Lease shall continue in full force and effect, except that the rent during the Renewal Term shall be adjusted as provided in this Lease.

3.             RENT.

 

(a)           Basic Rent. Tenants shall pay to Landlord as rent hereunder (“Basic Rent”) as follows:

(1)           During the initial Term, the amount of One Hundred Twenty Thousand ($120,000.00) Dollars per year, payable in equal monthly installments of Ten Thousand ($10,000.00) Dollars on or before the first day of each month;

(2)           Thereafter, for any Renewal Term, Landlord has the right to increase the Basic Rent by a reasonable amount relative to the economic circumstances of the area.

Tenants shall pay the Basic Rent in advance in equal monthly installments on the first day of each and every month during the Term of this Lease without demand, offset, reduction, or abatement. All other amounts due from Tenants to Landlord hereunder shall hereinafter be referred to as “Additional Rent” (Additional Rent, together with Basic Rent, being hereinafter referred to as “Rent”).

 

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(b)           Late Charges. In the event that Tenants fail to make any payment of Rent due hereunder within ten (10) days of the date due, Tenants shall pay a late charge of five (5%) percent of the amount being paid late, not as a penalty but as compensation to Landlord for the additional cost of collection.

(c)           Rent Prorations. In the event that the Commencement Date is other than the first day of a calendar month or in the event that the Term of this Lease terminates on other than the last day of a calendar month, then the Basic Rent for the portion of that month shall be prorated based upon the actual number of days of that month contained within the Term.

4.             USE. Tenants shall use the Premises only as Tenants’ commercial head-quarters and for no other purpose. Tenants may not use the Premises for any purpose other than that stated in this Section 4 without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

5.             COMPLIANCE WITH LAWS. Tenants covenant and agree to comply with all federal, state, and local laws, statutes, ordinances, rules, regulations, orders, and requirements relating to Tenants’ use and occupancy of the Premises. Tenants further covenant and agree to permit nothing to be done in, on or concerning the Premises which would invalidate, conflict with, or increase the premiums for fire, casualty, or liability insurance covering the Premises.

6.             ENVIRONMENTAL PROVISIONS.

(a)           Environmental Definitions. The term “Hazardous Materials” shall mean any product, co-product, substance, material, waste, gas, PCBs or particulate matter which is regulated by any local government authority, the Commonwealth of Pennsylvania, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a “Hazardous Waste,” “Hazardous Material,” “Hazardous Substance,” Extremely Hazardous Waste,” “Restricted Hazardous Waste,” “Regulated Substance,” “Pollutant,” “Contaminant,” “Residual Waste,” or similar label under any provision of federal or Pennsylvania Law; (ii) Petroleum, or any fraction thereof; (iii) asbestos; (iv) polychlorinated biphenyl; (v) radioactive material; (vi) designated as a “hazard substance” pursuant to the Clean Water Act; (vii) defined as “hazardous substance,” “Pollutant or Contaminant,” or “Petroleum, or any fraction thereof, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act. The term “Environmental Laws” shall mean all statutes specifically described in the foregoing sentence and all federal, state, and local environmental health and safety statutes, ordinances, codes, rules, regulations, orders, decrees, and common law actions regulating, relating to, or imposing liability or standards concerning or in connection with Hazardous Materials.

(b)           Environmental Representations, Warranties, and Covenants. Tenants covenant that it has not brought and shall not bring, keep, or permit to be brought or kept in or on the Premises any flammable, explosive, or other dangerous materials including, without limitation, any materials that are regulated as Hazardous Materials under any federal, state, or local environmental law, rule, or regulation; provided, however, that Tenants may permit any such materials to be kept on the Premises so long as the same are kept and stored and disposed of in accordance with all applicable Environmental Laws.

In the event that Tenants receive any notice of:

(1)           The happening of any event involving the spill, discharge, or cleanup of any hazardous or toxic waste or material, including any petroleum product, on or about the Premises (individually, a “Hazardous Discharge”); or

 

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(2)           Any complaint, order, citation, or notice with regard to air emissions, water discharges, or noise emissions under any Environmental Law (individually, an “Environmental Complaint”) from any person or entity including, without limitation, the Pennsylvania Department of Environmental Protection (“DEP”), the United States Environmental Protection Agency (“EPA”), or the United States Army Corps of Engineers (the “Corps”), then Tenants shall immediately give written notice thereof to Landlord and shall promptly comply with its obligations under law with regard to such Hazardous Discharge or Environmental Complaint.

(c)           Tenants’ Environmental Indemnity. Tenants agree to indemnify, defend, and hold harmless Landlord and its successors and assigns from and against any and all debts, liens, claims, causes of action, administrative orders and notices, costs (including, without limitation, response and/or remedial costs), personal injuries, losses, damages, liabilities, demands, interests, fines, penalties and expenses (including reasonable attorneys’ fees and expenses, consultants’ fees and expenses, technical and legal investigation fees and expenses, court costs, and all other out-of-pocket expenses), suffered or incurred by Landlord, its successors and assigns, as a result of any matter, condition, or state of facts involving Environmental Laws or Hazardous Materials shown to be caused by Tenants during the Term or any Renewal Term (or through Tenants’ prior occupancy) and which fail to comply with (i) Environmental Laws or (ii) any common law theory of liability, regardless of whether or not Tenants had knowledge of same.

7.             ALTERATIONS, ADDITIONS, AND MODIFICATIONS.

(a)           Alterations, Additions, and Modifications. Neither Tenants nor Landlord shall make any alterations, changes, improvements, repairs, replacements, or additions to the Premises without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. Tenants may remove its trade fixtures, furniture, and equipment not attached to the Premises at any time or upon the expiration of the Term, if Tenants are not then in default of this Lease, provided that Tenants shall repair promptly any and all damage caused by such removal.

(b)           Mechanics’ Liens. Tenants have no authority to encumber the Premises with any lien including, but not limited to, mechanics’ and materialmen’s liens. Tenants shall not suffer or permit any such lien to exist. Should any such lien hereafter be filed, Tenants shall promptly discharge the same at its sole cost.

8.             REAL ESTATE TAXES.

(a)           Tenants to Pay. Tenants shall pay, no later than ten (10) days prior to the date upon which the same become delinquent, all real estate taxes (county, municipal, and school district), and general and special assessments (including sewer and water rentals and charges, trash, street lights, etc.) which are assessed against the Premises, along with any lienable item of a similar nature assessed or imposed by any governmental entity during the Term of this Lease. Upon request, Tenants shall provide Landlord with evidence of payment of such real estate taxes and assessments.

(b)           Proration. Tenants’ liability for such real estate taxes, charges, and assessments shall be prorated on the basis of a 365-day year to account for any fractional portion of a fiscal tax year included in the Term at its commencement and at its expiration or termination.

 

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(c)           Landlord’s Right to Pay at Tenants’ Cost. If Tenants fail to pay any such real estate taxes or assessments that it is obligated to pay pursuant to this Section 8 within the time period specified in Subsection 8(a), Landlord may pay such real estate taxes or assessments, as the case may be, together with the interest and penalties thereon, and the amount so paid shall be considered Additional Rent due and in arrears.

(d)           Right to Contest. Tenants may contest taxes that it is obligated to pay and make application for the reduction thereof, or of any assessment upon which the same may be based, and Landlord agrees, at the request of Tenants, to execute or join in the execution of any instruments or documents reasonably necessary in connection with such contest or application. If Tenants shall contest the amount or legality of any such real estate taxes or assessments, or make application for the reduction thereof or of any assessment upon which the same may be based, the time within which Tenants shall be required to pay the same shall be extended until such contest or application shall have been finally determined. Tenants agree that it will prosecute any such contest or application with due diligence and that it will, within thirty (30) days after final determination thereof, pay the amount of any such real estate taxes or assessments which may have been the subject of such contest or application as so determined, together with any interest and penalties, costs and charges which may be payable in connection therewith.

9.             REPAIR AND MAINTENANCE. Tenants, at its own cost and effort, represent and warrant that for the duration of the lease term that the following items of the Premises will continue to be kept in good working order and repair (unless repairs or maintenance are caused by defects in the original installation or construction of the facilities and all improvements to the Premises): hot water, heating, air conditioning, plumbing, and electrical systems. Tenants will make, at its own cost and efforts, any and all repairs of a structural nature to said improvements including, but not limited to, the roof (except to the extent that damage to the roof is caused by the negligence of Landlord), exterior walls, and foundation walls; and Tenants will also make, at its own costs and effort, any non-structural repairs (except those made necessary by defects in construction) as well as the maintenance of the driveways and parking lots. If the repairs required to be made by Tenants are not completed within a reasonable time after request for such repair by Landlord, Landlord shall have the option to make such repairs after first giving Tenants fifteen (15) days’ notice of its intention to do so, and any amounts expended by virtue thereof shall be added to or subtracted from the next month’s rent in the full amount of the expenditures.

Tenants, during the term of this Lease, shall at its own expense, maintain and repair when needed all of the mechanical equipment (HVAC system), including but not limited to heating and air conditioning units, plumbing, and electrical units, in a good condition and good state of repair. Further, Tenants shall maintain a service contract on the HVAC system with a reputable heating and air conditioning contractor, providing for regular routine maintenance, changing of filters, and lubricating the HVAC system, or if it does not maintain a service contract, it shall provide to Landlord evidence that it has had the HVAC system inspected and serviced at least twice during each calendar year.

Tenants shall keep the Premises free and clear of rodents, bugs, and vermin, and Tenants shall use, at its cost, and at such intervals as Landlord shall reasonably require, a reputable pest extermination contractor to provide extermination services in the Premises.

Tenants shall keep the Premises and adjacent common areas orderly, neat, clean, and free from rubbish and trash at all times and to permit no refuse to accumulate around the exterior of the Premises. Trash shall be stored in a sanitary and inoffensive manner inside the Premises or in screened areas approved by Landlord, and Tenants shall cause the same to be removed at reasonable intervals.

 

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10.           INSURANCE.

(a)           Hazard/Property Insurance. Tenants shall insure the Premises against fire and other casualties (with extended coverage) at the replacement cost of the Improvements (including any additions, alterations, or modifications to the Improvements) with an insurer authorized to transact business within the Commonwealth of Pennsylvania and reasonably acceptable to Landlord and any mortgagees of Landlord. The policy shall name Landlord and any mortgagees of Landlord as loss payees thereunder and shall provide such coverages and contain such endorsements as Landlord and any mortgagees of Landlord may reasonably require from time to time. The policy of insurance shall provide that it will not be canceled without at least thirty (30) days prior written notice to Landlord.

(b)           Liability Insurance. Tenants shall carry public liability insurance with an insurer authorized to transact business in the Commonwealth of Pennsylvania (which policy may be an umbrella policy) and reasonably acceptable to Landlord, with a limit of liability of not less than $1,000,000.00 per person and $3,000,000.00 per occurrence and property damage liability of not less than $1,000,000.00. Each policy shall name Landlord and any mortgagees of Landlord as additional insureds thereunder and shall provide such coverages and contain such endorsements as any mortgagee of Landlord may reasonably require from time to time.

(c)           Tenants’ Insurance. Tenants shall maintain, at its expense, fire and extended coverage insurance on all of its personal property located in, at or on the Premises including, without limitation, all removable trade fixtures, furniture, and equipment.

11.           UTILITIES. Tenants shall pay all charges for utilities of any kind relating to the Premises.

12.           DESTRUCTION OF IMPROVEMENTS LOCATED ON PREMISES.

(a)           Obligation to Reconstruct. If the Improvements are damaged by fire, the elements, accident, or other casualty such that no more than fifty (50%) percent of the area of the Improvements is destroyed or no more than fifty (50%) percent of the total value of the Improvements is destroyed, then Landlord shall have the obligation to reconstruct the Premises and the Improvements substantially as they existed on the Commencement Date. Landlord shall proceed diligently with the reconstruction of the Improvements and the Premises. During such period of reconstruction, Rent hereunder shall abate in proportion to the area of the Improvements rendered unfit for occupancy, in Tenants’ reasonable judgment.

(b)           Option to Reconstruct. If the Improvements are damaged by fire, the elements, accident, or other casualty such that in excess of fifty (50%) percent of the area of the Improvements is destroyed or in excess of fifty (50%) percent of the total value of the Improvements is destroyed, then either Landlord or Tenants may, at their option, terminate this Lease by written notice to the other, in which event neither Landlord nor Tenants shall have any further liability hereunder from the date of such notice. In the event that neither Landlord nor Tenants elect to terminate this Lease as aforesaid, Landlord shall cause the damage to be repaired as provided in Subsection 12(a) of this Lease and the Rent shall abate during such period of reconstruction in proportion to the area of the Improvements rendered unfit for occupancy. The parties shall make their election as provided in this Subsection 12 (b) within thirty (30) days following the casualty.

 

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13.           EMINENT DOMAIN.

(a)           Total Taking. In the event that the entire Premises, or so much of the Premises so that the Improvements and the Premises, in the reasonable judgment of Tenants, cannot be reconstructed as an economically viable project, is taken or condemned pursuant to the power of eminent domain, or by purchase in lieu thereof, this Lease shall terminate on the date of the vesting of title in the condemnor and neither Landlord nor Tenants shall have any further liability hereunder from such date.

(b)           Partial Taking. In the event that part, but not all of the Premises is taken or condemned pursuant to the power of eminent domain, or by purchase in lieu thereof, so that in the reasonable judgment of Tenants the Improvements and the Premises cannot be reconstructed as an economically viable project, this Lease shall terminate on the date of the vesting of title in the condemnor and neither Landlord nor Tenants shall have any further liability hereunder from such date.

(c)           Temporary Taking. In the event of a temporary taking of the Premises pursuant to the power of eminent domain, that negatively impacts upon Tenants’ ability to use the Premises for their intended purpose, this Lease shall not be terminated thereby but Rent shall abate in proportion to the area taken during the period of the taking. In exchange for abatement of Tenants’ Rent, all compensation payable for the temporary taking shall be the sole property of Landlord.

14.           SUBORDINATION AND ATTORNMENT. This Lease shall be subject and subordinate to the lien of any mortgages which may now or hereafter be placed upon the Premises by Landlord; provided, however, that such subordination shall permit Tenants to occupy the Premises under the terms of this Lease so long as Tenants are not in default hereunder. Tenants agree to attorn to any purchaser at foreclosure sale or by deed in lieu thereof. Landlord may obtain a subordination and nondisturbance agreement, in form and content acceptable to Tenants, from all present and future lenders holding a security interest in or having a mortgage upon the Premises.

15.           ASSIGNMENT, SUBLETTING, AND TRANSFERS. Tenants shall not assign this Lease or sublet any or all of the Premises without the prior written consent of Landlord, which consent shall neither be unreasonably withheld or delayed; provided, however, that notwithstanding any such assignment or sublease, Tenants shall remain primarily liable under this Lease and shall not be released by such assignment or sublease.

16.           EVENTS OF DEFAULT; REMEDIES.

(a)           Events of Default.

(i)           Default by Tenants. Each of the following shall, if not cured within the time periods prescribed herein, constitute an event of default by Tenants:

(1)           Basic Rent, Additional Rent, or any other Rent is not paid within ten (10) days of when due;

(2)           Tenants fail to comply with any term, provision, covenant, or condition of this Lease;

 

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(3)           Tenants fail or are unable to pay its debts generally as they become due; transfer property in fraud of its creditors; make an assignment for the benefit of its creditors; seek the appointment of a receiver or trustee for Tenants’ assets or file for protection under Title 11 of the United States Code (or any statute in replacement or substitution therefor) or any similar state law; and

(4)           A receiver or trustee is appointed for Tenants’ assets on the application of a third party or an involuntary petition in bankruptcy is filed against Tenants, in each such case when the same remains undismissed for a period of sixty (60) days.

(ii)           Default by Landlord. Each of the following shall, if not cured within the time periods prescribed herein, constitute an event of default by Landlord:

(1)           Landlord fails to comply with any term, provision, covenant, or condition of this Lease;

(2)           Landlord fails or is unable to pay its debts generally as they become due; transfers property in fraud of its creditors; makes an assignment for the benefit of its creditors; seeks the appointment of a receiver or trustee for Landlord’s assets or files for protection under Title 11 of the United States Code (or any statute in replacement or substitution therefor) or any similar state law; and

(3)           A receiver or trustee is appointed for Landlord’s assets on the application of a third party or any involuntary petition in bankruptcy is filed against Landlord, in each such case when the same remains undismissed for a period of sixty (60) days.

(b)           Remedies.

(i)            Landlord’s Remedies. Landlord shall give Tenants notice of each and every event of default as it or they occur and Tenants shall have ten (10) days in the event of a monetary default, and thirty (30) days in the event of a non-monetary default, after its receipt of written notice of such event of default from Landlord, within which to commence a cure of that default. Failure of Tenants to commence or to effect a cure within such ten (10) or thirty (30) day period, as applicable, shall be an event of default under this Lease, and Landlord may, at its option and without further written notice to Tenants, in addition to all other remedies given hereunder or by law or equity, do any one or more of the following:

(1)           Terminate this Lease, in which event Tenants shall immediately surrender possession of the Premises to Landlord;

(2)           Enter upon and take possession of the Premises and expel or remove Tenants and any other occupant therefrom, including any property of such person, with or without force;

 

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(3)           With or without having terminated this Lease, accelerate the whole Rent for the balance of the Term (or any Renewal Term in effect at the time of a default). Landlord may immediately proceed to collect or bring an action for the whole Rent, or such part thereof as aforesaid, as Rent being in arrears, or may file a proof of claim in any bankruptcy or insolvency proceeding for such Rent, or may institute any other proceedings to enforce payment thereof; and

(4)           With or without terminating this Lease and with or without reentering and obtaining possession of the Premises, Landlord may lease the Premises to any other person upon such terms as Landlord may deem reasonable, and for a term within or beyond the Term of this Lease. Tenants shall be liable for any loss in Rent for the balance of the Term, together with all reasonable expenses or costs incurred by Landlord in reentering the Premises, such as payment of commission, the making of alterations, or otherwise, and Landlord may recover such expenses or costs at any time, or from time to time, after any of the foregoing events, whether prior to the end of the Term or otherwise.

No such termination of this Lease, nor taking, nor recovering possession of the Premises, with or without termination of this Lease, shall deprive Landlord of any remedies or actions against Tenants for Rent or for actual damages due or to become due for the breach of any covenant or condition herein contained, nor shall the bringing of any such action for Rent, or breach of any covenant or condition, nor the resort to any other remedy herein or otherwise provided for the recovery of Rent or damage for such breach, be construed as a waiver of the right to obtain possession in the manner herein provided.

(ii)           Tenants’ Remedies. In the event that Landlord shall fail to perform any of its duties or obligations hereunder, Landlord shall have a period of ten (10) days in the event of a monetary default, and thirty (30) days in the event of a non-monetary default, after its receipt of written notice of such event of default from Tenants, within which to commence a cure of that failure. Failure of Landlord to commence or to effect a cure within such ten (10) or thirty (30) day period, as applicable, shall be an event of default under this Lease, and Tenants may, at its option, elect to:

(1)           Terminate this Lease;

(2)           Provide Landlord with an additional period of time within which to effect the cure (but not in prejudice of its right to terminate this Lease at a later date); or

(3)           Commence such cure itself. In this event, Tenants may offset any expenses it incurs in effecting such cure against the Rent and other charges due and payable by Tenants hereunder, or require Landlord immediately to reimburse Tenants for such expenses.

In the event that Landlord receives notice that it is in default under any mortgage covering the Premises, Landlord shall promptly provide a copy of such notice to Tenants and shall immediately commence to cure such default. If Landlord fails to cure the default within a period of thirty (30) days, Tenants may, at its option, elect to proceed in accordance with options (1), (2), and (3) as set forth in this Subsection 16(b)(ii).

 

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(c)           Additional Costs. In case of an event of default, the defaulting party shall also pay to the non-defaulting party all reasonable expenses incurred by the non-defaulting party in enforcing its remedies, including reasonable attorneys’ fees and court costs.

(d)           Right of Landlord and Tenants to Perform. If either Landlord or Tenants fails to make any payment, perform any obligation, or cure any default hereunder, Landlord or Tenants, as the case may be, without obligation to do so and without thereby waiving such failure or default, may, after fifteen (15) days’ notice to the non-performing party (should no prior notice have been given) make such payment, perform such obligation, and/or remedy such default for the account of the non-performing party, and the non-performing party shall pay upon demand all reasonable costs, expenses, and disbursements (including reasonable attorneys’ fees) incurred by the other party in taking such remedial action. In addition to and not in limitation thereof, in the event that Landlord or Tenants, as the case may be, shall make any payment under this Subsection 16(d), such party shall receive interest from the non-performing party at the rate of prime plus three (3%) percent per annum from the date of such payment until the date of repayment.

17.           INDEMNIFICATION.

(a)           Indemnification of Landlord. Tenants hereby agree to indemnify, hold harmless and defend Landlord (and its successors and assigns) from and against any claim, action, loss, liability, damage or cost and expense, including without limitation, reasonable attorneys’ fees (hereinafter collectively referred to as “Claims”), resulting from or arising out of:

(1)           Any breach or inaccuracy of any representation or warranty, non-performance of any agreement, covenant, promise, or obligation on the part of Tenants contained in this Lease;

(2)           Any and all liability, claims, damages, penalties, or judgments;

(3)           Injury to person or property sustained in and about the Premises in the custody and control of the Tenants; and

(4)           All actions, judgments, awards, claims, demands, causes of action, losses, damages, liabilities, cost and expenses (including reasonable attorneys’ fees and expenses) incident to any of the foregoing.

(b)           Indemnification of Tenants. Landlord hereby agrees to indemnify, hold harmless and defend Tenants (and its successors and assigns) from and against any Claims resulting from or arising out of:

(1)           Any breach or inaccuracy of any representation or warranty, non-performance of any agreement, covenant, promise or obligation on the part of Landlord contained in this Agreement; and

(2)           All actions, judgments, awards, claims, demands, causes of action, losses, damages, liabilities, cost and expenses (including reasonable attorneys’ fees and expenses) incident to any of the foregoing.

 

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18.           RIGHT OF FIRST REFUSAL. During the Term of this Lease, and if Tenants are not then in default of this Lease, Tenants shall have a right of first refusal (the “First Refusal”) to purchase the Premises from Landlord, its successors and assigns. At such time as Landlord receives a bona fide offer from an unrelated third party to purchase the Premises that Landlord desires to accept (the “Offer”), Landlord shall first deliver a copy of such offer to Tenants, whereupon Tenants may, within thirty (30) days following receipt of the offer, either exercise or decline to exercise its First Refusal. Failure on the part of Tenants to act shall be deemed a rejection of the offer to exercise its First Refusal. Should Tenants exercise its First Refusal, Tenants and Landlord shall execute a sales agreement in the form of the Offer and shall thereafter close in accordance therewith.

19.           MISCELLANEOUS.

(a)           Holdover Tenancy. Any holding over by Tenants with or without the consent of Landlord after the expiration of the Term of this Lease shall be construed to be a tenancy from month-to-month and shall be at one hundred and fifty (150%) percent of the Basic Rent payable immediately prior to the expiration of the Term of this Lease and in accordance with all of the other terms, provisions, covenants, and conditions contained in this Lease.

(b)           Quiet Enjoyment. Provided that Tenants are not at such time in default hereunder, Tenants shall have peaceable and quiet enjoyment and possession of the Premises during the Term of this Lease without any hindrance from Landlord, its agents or employees.

(c)           Estoppel Certificates. Each party to this Lease agrees that, within ten (10) days after request by the other party, they will deliver an estoppel certificate to any proposed mortgagee or purchaser, or to the requesting party, certifying (if such be the case) that this Lease has not been modified, that this Lease is in full force and effect, that there are no defenses or offsets thereof (or stating any claims for such by the other party), and any other matter reasonably requested.

(d)           Inspection. Landlord or Landlord’s agents or employees shall have the right to enter the Premises at reasonable times to examine the same, to show the Premises to prospective mortgagees, purchasers, or lessees of the Premises, and to make such repairs as Landlord may deem necessary or desirable (without, however, any obligation so to do); provided that such repairs shall not unreasonably interfere with Tenants’ occupancy of the Premises or the conduct of its business therefrom.

(e)            Broker’s Fees. Tenants and Landlord represent and warrant that they have dealt with no real estate agent or broker who would be entitled to a commission as a result of the execution and delivery of this Lease or upon Tenants’ exercise of the First Refusal.

(f)            Recording. This Lease shall not be recorded but a memorandum of this Lease may be recorded by either party at its option and at its cost and the other party agrees to execute any such memorandum upon such request.

(g)           Successors and Assigns. Subject to the provisions of Section 15 of this Lease, this Lease and all of the terms, provisions, covenants, and conditions contained herein shall inure to the benefit of, and be binding upon, Landlord and Tenants and their respective heirs, personal representatives, successors and assigns.

 

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(h)           No Partnership. Nothing contained in this Lease shall be deemed or constructed by the parties hereto or by any third person as creating the relationship of principal and agent or a partnership or joint venture between the parties hereto, it being expressly understood and agreed that no provision contained herein nor any act of the parties hereto shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant.

(i)            No Waiver. No waiver of any condition, legal right, or remedy shall be implied by the failure of either party to declare a forfeiture, or for any other reason, and no waiver of any condition or covenant shall be valid unless it is contained in a writing signed by both parties, nor shall the waiver of a breach of any condition be claimed or pleaded to excuse the future breach of the same condition or covenant. This Lease cannot be amended, modified, or terminated except by an instrument in writing signed by all of the parties.

(j)            Governing Law. This Lease shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.

(k)           Jurisdiction for Disputes. The parties agree that any dispute arising under this Agreement shall be filed in the Court of Common Pleas of Lancaster County, Pennsylvania. The parties hereby consent to the jurisdiction of the Court of Common Pleas of Lancaster County, Pennsylvania, and hereby waive any objection thereto. Should any party hereto be required to take legal action to enforce its rights hereunder and prevail in that legal action, then that party shall be entitled to the recovery of all costs incurred, including, but not limited to, filing fees and reasonable attorneys’ fees. Each Party hereby agrees to waive its right to jury trial.

(1)           Entire Agreement. This Lease contains the entire agreement between Landlord and Tenants relative to the Premises and supersedes all prior and contemporaneous negotiations, understandings, and agreements, written or oral, between the parties.

(m)           Severability. If any term or provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

(n)           Time of Essence. Time is of the essence with respect to all of Tenants’ and Landlord’s obligations under this Lease.

(o)           Notices. All notices, requests, demands, directions, and other communications (collectively “Notices”) under the provisions of this Lease shall be in writing and shall be sent (i) by first-class express mail, certified with return receipt requested, or (ii) by fax with confirmation in writing mailed first-class, or (iii) by guaranteed overnight delivery service with receipt therefore, or (iv) by hand, in all cases with charges prepaid, and any such properly given Notice shall be effective when received or when such delivery is refused. All Notices shall be sent:

If to Landlord:

JPF Venture Fund 1, LP

800 South Queen Street

Lancaster, PA 17603

 

11

  

  

  

 

If to Tenants:

OCEES International, Inc.

800 South Queen Street

Lancaster, PA 17603

Ocean Thermal Energy Corporation

800 South Queen Street

Lancaster, PA 17603

Or in accordance with the last unrevoked written direction from such party to the other parties hereto.

IN WITNESS WHEREOF, the parties have executed this Lease or have caused this Lease to be signed in their respective corporate names by authorized officers, as of the date first set forth above.

	  	
LANDLORD:

	  	  
	
WITNESS:

	
JPF VENTURE FUND 1, LP

	  	
General Partner

	
/s/ Kim A. Shaub

	
By: /s/ James Greenberg 10-25-10

	  	
Member

	  	  
	  	
TENANTS:

	  	  
	
WITNESS:

	
OCEES INTERNATIONAL, INC.

	  	  
	
/s/ Steve Oney

	
By: /s/ Harry Jackson 3 Nov 10

	  	  
	
WITNESS:

	
OCEAN THERMAL ENERGY CORPORATION

	  	  
	
/s/ Kim A. Shaub

	
By: /s/ Jeremy P. Feakins 10-25-10

12ex1003form10.htm

OCEAN THERMAL ENERGY CORPORATION

Employment Agreement

This Employment Agreement (“Agreement”) is effective January 1, 2011 and is entered into by and between Ocean Thermal Energy Corporation, a Delaware corporation having an office at 800 South Queen Street, Lancaster, Pennsylvania (hereinafter referred to as “Company”), and Jeremy P. Feakins, an individual whose address is [private] (“Executive”).

In consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and Executive hereby agree as follows:

1.           Employment

Company agrees to employ Executive and Executive agrees to enter the employment of the Company upon the terms and subject to the conditions herein provided.

2.           Effective Date

This Agreement is effective immediately upon the date first written above (the “Effective Date”).

3.           Location

Executive’s principal office shall be located in Company’s corporate offices at 800 South Queen Street, Lancaster, Pennsylvania. 

4.           Duties and Responsibilities

	
  

	
(a)

	
The Company hereby agrees that Executive shall serve as Chief Executive Officer (“CEO“) of the Company and its subsidiaries, reporting directly to the Company’s Board of Directors (“Board”). In this capacity, Executive shall be responsible for the daily operation and management of all of the Company’s business affairs and personnel.

	
  

	
(b)

	
During the term of this Agreement, Executive shall devote substantially full time and attention to the execution of the duties and responsibilities hereunder. Notwithstanding the above, Executive may hold a seat on the board of directors of one or more other companies, engage in passive personal investments and in other business, industry, civic and charitable activities that do not materially conflict with the business affairs of Company or materially interfere with the performance of Executive’s duties and responsibilities hereunder.

5.           Compensation

	
  

	
(a)

	
Salary. The Company acknowledges the compensation provided to the Executive hereunder is significantly less than would normally be commanded by the Executive or other such executives with similar experience and credentials for these services. Executive shall be paid a base annual salary (“Salary”) of $350,000 payable in bi-weekly installments beginning the Effective Date; provided, however, that in consequence of the Company’s limited immediate available cash resources and as an accommodation thereto (the “Accommodation”), except as otherwise provided herein, Executive shall receive for the period beginning the Effective Date and continuing until the Company’s first financial close on a project with a capital cost of $25 million or more (“Financial Close”), $180,000 per annum. Within five (5) business days of such first Financial Close, the Executive shall be paid the sum of $350,000, as a bonus, plus the difference between the amount that otherwise would have been paid to the Executive absent the Accommodation and the amount received by the Executive pursuant to the Accommodation.

 

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(b)

	
Salary Adjustment. The Board will review Executive’s compensation on an annual basis and consider whether to increase (but not decrease) the Executive’s Salary. Any increased Salary granted by the Board shall become the new Salary until subsequently increased by the Board.

	
  

	
(c)

	
Share Award. The Company may make an award of the Company’s Common Stock to the Executive in such number of shares, at such time or times, and subject to such terms and conditions as the Board shall in its sole and absolute discretion determine.

	
  

	
(d)

	
Options. Immediately upon the Company’s adoption of a stock plan (the “Plan”), as an additional retention incentive, the Company shall issue to Executive a five-year option, including provision for a “cashless exercise,” to purchase one million (1,000,000) shares of the Company’s Common Stock (the “Option”) pursuant to the terms of the Plan, which Option shall constitute, to the extent allowable under Section 422 of the Internal Revenue Code (the “Code”), an Incentive Stock Option. One-half of the Option shares shall vest one year from the grant date, and twenty-five percent of the Option shares shall vest on the second and third year anniversary dates of the grant date, respectively; provided, however, that all of the Option shares shall vest immediately upon an Exit. The term “Exit,” as used herein, shall mean a Change in Control, as defined in Exhibit A attached hereto, or, any issuance of preferred stock by the Company. The Option will be issued pursuant to the Plan and in accordance with the following terms:

	
  

	
I.

	
The Option shall not be exercisable after the expiration of five (5) years from the grant date (the “Option Term”).

	
  

	
II.

	
In the event Executive’s employment is terminated by the Company for any reason other than for Cause, all unvested portions of the Option shall immediately vest and the entire Option will remain valid throughout the Option Term; and

	
  

	
III.

	
In the event Executive’s employment is voluntarily terminated by Executive all unvested portions of the Option are forfeited and the remaining time to exercise the vested portion of the Option remains valid.

	
  

	
IV.

	
Notwithstanding any provision in this Section 5(d) to the contrary, the Option will be granted subject to the requirements of Section 422 of the Code, and to the extent that the Option fails to satisfy such provision, the Option will be treated as a stock option that is not an incentive stock option.

6.           Plan Registration

With respect to any Plan under which Executive is granted shares of Company Common Stock, or options to purchase shares of Company Common Stock, at any time when such stock is publicly traded, prior to such time as shares become vested (e.g., in the case of an award of restricted stock) or options granted to Executive under the Plan are first exercisable, if such shares must be registered in order to be sold, the Company shall have registered the interests in the Plan and the shares of Company’s Common Stock reserved thereunder prior to the date on which the shares vest or the options first become exercisable, in accordance with all applicable securities laws.

 

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7.           Bonuses

	
  

	
(a)

	
Project Bonus. At the time of contract signing by all parties to any energy services agreement; power purchase agreement; build, own, operate and transfer agreement; or other similar or related agreement or agreements, where such agreement, or such agreements in the aggregate, provide for $25 million or more in revenue to the Company, the Company will pay the Executive a cash bonus equal to 100% of the Executive’s Salary in effect at the time of such signing plus 500,000 shares of the Company’s Common Stock.

	
  

	
(b)

	
Other Bonuses. The Executive will also be entitled to other annual bonuses consisting of cash, stock, restricted stock, options stock appreciation rights (“SARS”) or other forms of awards based upon his performance and Company’s overall achievement of its corporate goals. The types and amounts of such awards, if any, shall be determined solely in the discretion of and upon the recommendation of the Board; provided, however, that the present value of all such awards to the Executive in a year shall be adjusted, as necessary, to equal an amount not less than the present value of all such awards given to the executive employee of the Company receiving the highest present value of all similar awards in a year multiplied by a fraction, the numerator of which shall be the Executive’s Salary for the year and the denominator of which shall be such other executive’s annual base salary for the year.

8.           Executive Benefits

During Executive’s employment with the Company:

	
  

	
(a)

	
Executive will be entitled to four (4) weeks paid vacation time during each twelve-month period, with such vacation accruing until used. Any vacation time not used at the end of the Executive’s employment shall be paid out in cash equivalent based on the Executive’s Salary in effect at the time of the Executive’s termination and shall be paid not later than thirty (30) days thereafter; provided, however, that such amount shall be forfeited in the event that the Executive is terminated for Cause.

	
  

	
(b)

	
The Company will pay the health care, prescription drug, dental and/or vision insurance premiums for coverage of the Executive, his spouse and dependents under the standard Company plan or plans, if any, in effect from time to time during Executive’s employment with the Company.

	
  

	
(c)

	
Provided the Company obtains a policy of group life insurance and Executive complies with and satisfies all underwriting and other requirements of the insurer, the Company will pay the life insurance premiums for a term life insurance policy with a death benefit equal to four (4) times the Executive’s Salary in effect at the time the Executive first becomes eligible for such insurance.

	
  

	
(d)

	
The Company shall provide Executive with a monthly automobile allowance of $1,000.00, which amount shall be taxable to the Executive.

 

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(e)

	
Wherever possible, Executive will be entitled to travel First Class, or Business Class if available, for all methods of travel on Company business or at the convenience or request of the Company, on the carrier of his choice. At the request of the Executive, the Company will purchase the tickets on behalf of Executive in advance of such travel. Upon submission to the Company of usual and customary documentation, Executive will be reimbursed within five (5) business days for all reasonable out of pocket expenses that are incurred in connection with job related activities, as well as travel on behalf of the Company. The Executive will be provided with a Company credit card for use in business-related travel and other business expenses, which uses the Executive shall support with appropriate documentation as to their business purpose.

	
  

	
(f)

	
For each thirty-day period that the Executive is required to spend anywhere other than the Executive’s principal office as set forth in Section 3 hereof, the Company will provide a minimum of two (2) round-trip First Class, or Business Class when available, airfare tickets for Executive and/or Executive’s spouse or dependents to travel between such location and the Executive’s principal office as set forth in Section 3 hereof. The Executive shall be responsible for any income taxes attributable to the provision of airfare tickets, as applicable.

9.           Executive Kidnapping and Medical Evacuation Program(s)

The Company will provide at no cost to Executive, an Executive Kidnapping and Medical Evacuation program(s) and/or insurance policy, under which Executive will be provided coverage subject to such policies, terms, conditions and limitations as the Board shall approve in its sole discretion.

10.         Term of Employment

The term of employment hereunder shall be for a period of five (5) years commencing from the Effective Date (the “Term”). Commencing on the fifth anniversary of the Effective Date and on each successive one (1) year anniversary date thereafter, the term of employment hereunder shall be extended for a period of one (1) year (“Renewal Term”) unless either party gives the other notice of termination at least one hundred (100) days prior to the end of the Term or any Renewal Term. In such event, employment will terminate at the end of the Term or Renewal Term during which such notice was given.

	
  

	
(a)

	
Termination. Company may terminate Executive’s employment during the Term or any Renewal Term for any reason, but if such termination is for any reason other than for Cause, such termination shall be in accordance with the provisions of Section 12 hereof. If Executive is terminated for Cause, then Executive shall be paid within thirty (30) days of such termination the unpaid portion of Executive’s Salary then earned and due to Executive, and all compensation otherwise payable to Executive, including any and all unvested Plan awards and vested but unexercised Plan awards, under this Agreement shall be forfeited. As used herein, “Cause” means final conviction of a felony.

	
  

	
(b)

	
Notice. Should the Company terminate Executive’s employment for Cause, no advance notice from the Company will be required, and all of the Executive’s unvested Plan awards and vested Plan awards that have not been exercised as of the date of the termination will be forfeited immediately.

	
  

	
(c)

	
Shares and Options. Should the Company elect not to renew this Agreement after the Term or any Renewal Term, or should Executive voluntarily terminate his employment, then Executive shall retain the vested portion of any Plan award and the unvested portion will expire immediately upon Executive’s termination of employment. In each such case, all vested Plan awards shall be non-forfeitable and shall retain their original expiration date.

 

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11.         Change in Control

The provision for a Change in Control Payment as described in Exhibit A attached hereto shall be applicable to Executive so long as Executive is employed by Company and thereafter, to the extent provided in such Exhibit A.

12.         Severance

Other than in the case of a timely noticed non-renewal of Executive’s employment hereunder pursuant to Section 10, if Executive’s employment is terminated by Company without Cause for any reason during the Term or Renewal Term, Executive shall be entitled to receive from Company (i) a cash severance payment equal to three times the amount of the Executive’s then applicable Salary, if the termination occurs on or before the third anniversary of the Effective Date, (ii) a cash severance payment equal to the unpaid portion of the Executive’s then applicable Salary for the remainder of the Term or Renewal Term plus an amount equal to twice the Executive’s then applicable Salary, if the termination occurs after the third anniversary of the Effective Date but before the fifth anniversary of the Effective Date, or (iii) a cash severance payment equal to the unpaid portion of the Executive’s then applicable Salary for the remainder of the Term or Renewal Term if the termination occurs after the fifth anniversary of the Effective Date (each, a “Severance Payment”). In the event that the Executive is terminated by Company without cause, then all of Executive’s outstanding Plan awards shall immediately and fully vest. Other than any Change in Control Payment to which Executive may also be entitled in accordance with Section 11; any bonus to which Executive may be entitled under Section 7; or any payment or benefit to which Executive may be entitled under any separate agreement between Executive and the Company, the Company shall have no further obligation to Executive in the event of Executive’s termination by the Company without Cause beyond those obligations described in this Section 12. If the Company fails to make any payment when due under this Section 12, and Executive initiates arbitration pursuant to Section 17 to enforce his rights under this Agreement, and Company is found to have violated this Agreement, then Company shall be obligated to pay Executive, in addition to the Severance Payment and other sums owed under this Agreement, an additional payment (“Enforcement Payment”) equal to the Severance Payment plus the sum of all of the costs incurred by Executive, including attorneys’, fees, to enforce this Agreement. It is explicitly agreed that the Enforcement Payment is a reasonable estimate of the value of time and expense that would be incurred by the Executive to enforce this Agreement and in no case shall be considered a penalty. Any payments due under this Section 12 shall be paid by wire transfer to a bank account specified by Executive no later than three (3) business days after the Executive’s termination, except that the Enforcement Payment shall be due and payable in the same manner to Executive within ten (10) days of the date the Company is found to have violated this Agreement.

13.         Ownership of Information

All documents, drawings, memoranda, notes, records, file correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any information pertaining to the business of Company which Executive has developed, utilized or had access to during his employment with Company, are and shall be the sole and exclusive property of Company. Upon termination of Executive’s employment with Company for any reason, Executive shall promptly deliver this property and all copies thereof to Company.

 

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14.         Non-Solicitation

During the term of Executive’s employment and for a period of two (2) years thereafter, Executive will not, directly or indirectly, solicit or contact any employee of Company with a view to inducing or encouraging such employee to leave the employ of Company for the purpose of being hired by Executive or an employer affiliated with Executive. Executive agrees that money damages would not be a sufficient remedy for any breach of this Section 14 by Executive, and that, in addition to all other remedies to which the Company may be entitled, the Company shall be entitled to injunctive or other equitable relief as a remedy for any such breach or threatened breach. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies that may be available to it, whether at law or in equity, for any breach or threatened breach hereof by Executive, including the recovery of damages. In addition, Executive agrees that the Company shall be entitled to recover from the Executive its reasonable attorneys’ fees incurred in connection with obtaining any relief.

15.         D&O Insurance and Indemnification

As soon as practicable, the Company shall purchase a directors and officers liability insurance policy, the terms of which shall be approved by the Board, and will provide Executive with directors and officers liability insurance necessary to protect Executive from any and all expenses, obligations, liabilities, actions, suits or proceedings that may occur as the result of Executive’s employment by the Company. In addition, if at any time Executive is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was a director, officer, executive or agent of Company and/or of any of its affiliates, or is or was serving at the request of Company as a director, officer, executive or agent of any other corporation, partnership, joint venture, trust, executive benefit plan or other enterprise, Company shall indemnify Executive and hold Executive harmless against expenses (including court costs and reasonable attorneys’ fees), judgments, fines, penalties, amounts paid in settlement and any other liabilities actually and reasonably incurred by Executive in connection with such action, suit or proceeding to the full extent permitted by law. Expenses (including court costs and reasonable attorneys’ fees) incurred by Executive in appearing at, participating in, or defending any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative, shall be paid by Company at reasonable intervals in advance of the final disposition of such action, suit or proceeding promptly following receipt of Executive’s written claim, including supporting documentation. The indemnification provided under this Section 15 shall apply whether or not the negligence of any party is alleged or proved. Nothing in this Section 15 shall be deemed to provide Executive with a right to indemnification in excess of the authority of the Company to provide indemnification granted by applicable law, and all limitations on indemnification set forth in such law shall be deemed to govern this Section 15.

16.         Miscellaneous

	
  

	
(a)

	
All payments required to be made by Company hereunder shall be subject to any withholding pursuant to any applicable law or regulation.

	
  

	
(b)

	
This Agreement is binding upon, and shall inure to the benefit of, the parties hereto and their respective successors, heirs, administrators, executors and assigns.

	
  

	
(c)

	
This Agreement, including any exhibits hereto, contains the entire agreement between the parties concerning the subject matter hereof; any prior or contemporaneous agreements or understandings, oral or written, not contained in this Agreement, are superseded and of no effect; and this Agreement may not be amended or modified except by a writing signed by both parties.

 

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(d)

	
Should one party waive compliance by the other party to any term or provision of this Agreement, such waiver shall be limited to the facts or circumstances giving rise to the noncompliance and shall not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this agreement, nor shall it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring.

	
  

	
(e)

	
Any notice given hereunder shall be in writing and shall be deemed given when actually received or two (2) business days after tender to an overnight courier with a national reputation, duly addressed to the party concerned at the address specified in the preamble of this Agreement or such other address as a party shall provide in writing from time to time to the other party.

	
  

	
(f)

	
In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. The respective rights and obligations of the parties shall survive any termination of this Agreement to the extent necessary to preserve such rights and obligations.

17.         Applicable Law

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, except to the extent that federal laws supersede such laws, without regard to principles regarding conflicts of laws. Executive and Company agree that if any claim, action, dispute or controversy of any kind arises out of or relates to this Agreement or concerns any aspect of performance by any party under the terms of this Agreement, other than as may be enforced by way of injunctive relief pursuant to Section 14, prior to seeking any other remedies, the aggrieved party shall give written notice to the other party describing the disputed issue. Within ten (10) business days after the receipt of such a notice the parties shall attempt to resolve the dispute amicably through direct good faith negotiation. If the parties cannot so resolve the matter, the parties shall apply to the American Arbitration Association (“AAA”) for a single arbitrator to be appointed to arbitrate the dispute in accordance with the AAA rules applicable to employment disputes. Arbitration shall take place in Lancaster, Pennsylvania. The decision of the AAA arbitrator shall be final and binding on all parties. The parties agree not to litigate the matter except to the extent necessary to enforce the arbitration award. The costs and expenses of any litigation to enforce the arbitration award shall be borne by the non-prevailing party. Executive and Company hereby acknowledge that they are waiving their rights to a jury trial with respect to any matter within the scope of this Section 17. In addition, to the extent that this Agreement permits any matter to be litigated, Executive and Company irrevocably submit in any suit, action or proceeding arising out of or relating to this Agreement to the jurisdiction and venue of the United States District Court for the Eastern District of Pennsylvania or, if such court has no jurisdiction in the matter, then to the jurisdiction and venue of the Court of Common Pleas for Lancaster County, Pennsylvania, and each hereby waives any and all objections to jurisdiction or venue that Company or Executive may have under the laws of Pennsylvania or of the United States.

 

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18.         Section 409A Compliance

This Agreement shall be interpreted and performed so as to comply with any applicable provisions of Section 409A of the Code (“Section 409A”) and the regulations and official guidance issued pursuant thereto such as will avoid any inclusion of income by Executive under Section 409A of any payment or benefit under this Agreement or under any arrangement required to be aggregated with this Agreement. Terms defined in this Agreement will have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. Any payments that are due within the “short term deferral period” as defined in Section 409A or that are paid in a manner covered by Treas. Reg. Section 1.409A-1(b)(9)(iii) will not be treated as deferred compensation unless applicable law requires otherwise. Neither the Company nor Executive will have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A. In any event, the Company makes no representations or warranty and will have no liability to the Executive or any other person, other than with respect to payments made by the Company in violation of the provisions of this Agreement, if any provisions of or payments under this Agreement are determined to constitute deferred compensation subject to Section 409A but not to satisfy the conditions of that section. For purposes of this Agreement, a termination of employment with the Company shall mean a “separation from service” as defined in Section 409A. If and to the extent any portion of any payment, compensation or other benefit provided to Executive in connection with Executive’s separation from service (as defined in Section 409A) is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is at such time a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination Executive hereby agrees to be bound, such portion of the payment, compensation or other benefit will not be paid before the day that is six months plus one day after the date of separation from service (as determined under Section 409A) (the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of separation from service and the New Payment Date will be paid to Executive in a lump sum on the first payroll date after such New Payment Date, and any remaining payments will be paid on their original schedule.

19.         Excess Parachute Payments

	
  

	
(a)

	
In the event that the Executive is entitled to payments and/or benefits (i) in connection with Executive's employment with the Company or termination thereof or (ii) from the Company, any person whose actions result in a change of ownership or effective control covered by Section[Missing Graphic Reference]280G[Missing Graphic Reference](b)(2) of the Code, or any person affiliated with the Company or such person as a result of such change in ownership or effective control (collectively the “Company Payments”), and if such Company Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code, the Company shall pay to or for the benefit of the Executive at the time specified in subsection (c) below an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Company Payments and any U. S. federal, state, and local income or payroll tax upon the Gross-Up Payment, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments. For purposes of calculating the Gross-Up Payment, the Executive shall be deemed to pay income taxes at the highest applicable marginal rate of federal, state or local income taxation for the calendar year in which the Gross-Up Payment is to be made.

 

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(b)

	
Subject to any determinations made by the Internal Revenue Service (the “IRS”), all determinations as to whether a Gross-Up Payment is required and the amount of Gross-Up Payment and the assumptions to be used in arriving at the determination shall be made by the Company's independent certified public accountants, appointed prior to any change in ownership (as defined under Section 280G[Missing Graphic Reference](b)(2) of the Code) (the “Accountants”), in accordance with the principles of Section [Missing Graphic Reference]280G[Missing Graphic Reference] of the Code. All fees and expenses of the Accountants will be borne by the Company. Subject to any determinations made by the IRS, determinations of the Accountants under this Agreement with respect to (i) the initial amount of any Gross-Up Payment and (ii) any subsequent adjustment of such payment shall be binding on the Company and the Executive.

	
  

	
(c)

	
The Gross-Up Payment calculated pursuant to this Section 19 shall be paid no later than the thirtieth (30th) day following an event occurring which subjects the Executive to the Excise Tax; provided, however, that if the amount of such Gross-Up Payment or portion thereof cannot be reasonably determined on or before such day, the Company shall pay to the Executive the amount of the Gross-Up Payment no later than 10 days following the determination of the Gross-Up Payment by the Accountants. Notwithstanding the foregoing, the Gross-Up Payment shall be paid to or for the benefit of the Executive no later than 15 business days prior to the date by which the Executive is required to pay the Excise Tax or any portion of the Gross-Up Payment to any federal, state or local taxing authority, without regard to extensions.

	
  

	
(d)

	
In the event that the Excise Tax is subsequently determined by the Accountants to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the prior Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Gross-up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed the interest received or credited to the Executive by such tax authority for the period it held such portion. The Executive and the Company shall cooperate in good faith in determining the course of action to be pursued (and the method of allocating the expense thereof) if the Executive's claim for refund or credit is denied. However, if agreement cannot be reached, the Company shall decide the appropriate course of action to pursue provided that the action does not adversely impact any issues Executive may have with respect to his tax return, other than the Excise Tax.

	
  

	
(e)

	
In the event that the Excise Tax is later determined by the Accountants or the IRS to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment to or for the benefit of the Executive in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.

 

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(f)

	
In the event of any controversy with the IRS (or other taxing authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect the Executive. In the event issues are interrelated, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and the Executive's representative shall cooperate with the Company and its representative.

	
  

	
(g)

	
The Company shall be responsible for all charges of the Accountant.

	
  

	
(h)

	
The Company and the Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax.

20.         Counterparts

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

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed on the date first written above.

OCEAN THERMAL ENERGY CORPORATION

Signature: /s/ James D. Greenberg

Printed Name: James D. Greenberg

Title: Director

EXECUTIVE

Signature: /s/ Jeremy Feakins

Printed Name: Jeremy Feakins

 

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EXHIBIT A

Change in Control

If, within three (3) months following the occurrence of a Change in Control (as defined below), the Executive elects, by written notice to the Company, to terminate his employment with the Company then, in addition to any severance payments due under Executive’s Employment Agreement with the Company, the Company shall pay to the Executive, within 10 days after his termination of employment, a lump sum cash payment in an amount equal to the Change in Control Payment (as defined below). If the Executive’s employment is terminated prior to the date he elects to terminate but there is reasonable evidence that such termination (a) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this paragraph, such termination shall be considered to have occurred immediately following the Change in Control and the Executive’s election to terminate his employment as of the date of the Change in Control. As used herein, the following terms shall mean:

(a)           A “Change in Control” shall be deemed to have occurred upon: (i) the date of acquisition by any one person, or more than one person acting as a group (as defined in Treasury Regulations Section 1.409A-3(i)(5)(v)(B)), of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; provided, however, that if any one person, or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons shall not be deemed to be a Change of Control; (ii) the date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company; or (iii) the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value of more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions; provided, however, that transfers of assets of the Company of any value to a related person or entity as described in Treasury Regulations Section 1.409A-3(i)(5)(vii)(B) shall not result in a Change in Control. For purposes of (i) and (ii) above, a person shall be deemed to be the beneficial owner of any shares the person is deemed to own under the stock attribution rules of Section 318(a) of the Code.

(b)           “Change in Control Payment” shall mean an amount equal to three (3) times the Executive’s Salary in effect on the date of a Change in Control.

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