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Item 1.01
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Entry into a Material Definitive Agreement.
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On December 18, 2017 (the “Closing Date”),
Ocean Thermal Energy Corporation, a Nevada corporation (the “Company”), entered into an Equity Purchase Agreement (the
“Purchase Agreement”) with an institutional accredited investor (“Investor”) pursuant to which Investor
committed to purchase up to $15,000,000 of the Company’s common stock (the “Financing”). On the Closing Date,
the Company issued 1,714,285 shares of the Company’s common stock to the Investor as a commitment fee (the “Commitment
Shares”) and issued a common stock purchase warrant (the “Warrant”) to its placement agent Craft Capital Management,
LLC (the “Holder”) to purchase up to 1,363,636 shares of the Company’s common stock. The Warrant, issued pursuant
to the Company’s engagement with Holder, represents a broker fee of 8% of the maximum amount of proceeds available to the
Company in the Financing and is only exercisable on a pro rata basis as the Company obtains proceeds under the Financing. In connection
with the Financing, the Company and Investor also entered into a Registration Rights Agreement (collectively, together with the
Purchase Agreement and the Warrant, the “Transaction Documents”). The Company also agreed to pay the sum of $15,000
to legal counsel for Investor for preparation of the Transaction Documents.
Capitalized terms not defined herein shall
have the meaning set forth in the Transaction Documents which are attached hereto as Exhibits 10.1, 10.2 and 10.3 and incorporated
by reference into this Item 1.01.
Pursuant to the Financing, upon filing and
effectiveness of a Registration Statement on Form S-1 and provided other closing conditions are met, the Company shall have the
right, but not the obligation, to direct the Investor to purchase shares of the Company’s common stock (the “Put Shares”)
(i) in a minimum amount of not less than $10,000.00 and (ii) in a maximum amount of $1,000,000.00, provided that the number of
Put Shares shall not exceed 300% of the Average Daily Trading Volume. At any time and from time to time during the term of the
Purchase Agreement (the “Commitment Period”), the Company may deliver a notice to Investor (the “Put Notice”)
and shall deliver the Put Shares to Investor via DWAC within two (2) trading days. The Purchase Price for the Put Shares is 85%
of the lowest traded price (as reported by Bloomberg Finance L.P.) during the five (5) trading days immediately following the date
the Investor receives the Put Shares via DWAC associated with the applicable Put Notice (the “Valuation Period”). The
closing of a Put Notice shall occur within one (1) trading day following the end of the respective Valuation Period, whereby (i)
the Investor Shall deliver the investment amount to the Company by wire transfer of immediately available funds and (ii) Investor
shall return surplus Put Shares if the value of the Put Shares delivered to the Investor causes the Company to exceed the maximum
commitment amount. The Company shall not deliver another Put Notice to Investor within ten (10) trading days of a prior Put Notice.
The right of the Company to issue and sell
the Put Shares to the Investor is subject to the satisfaction of certain closing conditions, including, but not limited to, (i)
an effective Registration Statement on Form S-1 for resale by Investor of the Put Shares and Commitment Shares, (ii) accuracy of
the Company’s representations and warranties, (iii) the Company’s performance under the Purchase Agreement in all material
respects, (iv) no suspension of trading or delisting of common stock, (v) limitation of Investor’s beneficial ownership to
no more than 4.99%, (vi) the Company maintains its DWAC-eligible status, (vii) the Company maintains a sufficient share reserve,
and (viii) the minimum pricing for the Put Shares must exceed $0.01.
Pursuant to the terms of the Registration Rights
Agreement, by December 30, 2017, the Company must file the Registration Statement which relates to the resale by Investor of the
Put Shares and Commitment Shares.
On the date hereof, the Company will reserve
50,420,168 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under
the Transaction Documents and is required to reserve and keep available out of its authorized and unissued shares of common stock
a number of shares of common stock at least three (3) times the number of shares of common stock obtained by dividing the remaining
balance on the maximum commitment amount by the Purchase Price. Neither the Investor, nor any affiliate of the Investor acting
on its behalf or pursuant to any understanding with it, will execute any short sales during the period from the date hereof to
the end of the Commitment Period.
The foregoing summary description of the terms
of the Transaction Documents may not contain all information that is of interest to the reader. For further information regarding
the terms of the Transaction Documents, reference is made to such Transaction Documents, which are filed hereto as Exhibits 10.1
– 10.3, and are incorporated herein by this reference.