RAYMOND JAMES

XXXXXXX XXXXX

March 31, 2011

CONFIDENTIAL

Xx. Xxxxxx Xxxxxxx

Chairman & CEO

Ocean Thermal Energy Corporation

000 Xxxxx Xxxxx Xxxxxx

Lancaster, PA 17603

Re: Baha Mar SDC Project

Gentlemen:

1.            This letter agreement (the “Agreement”) confirms the agreement of Ocean Thermal Energy Corporation, its affiliates, subsidiaries and/or successors (the “Company”) to engage Xxxxxxx Xxxxx & Associates, Inc. (“Xxxxxxx Xxxxx”) during the Term (as defined below) to act as provided herein as exclusive project advisor and sole book running manager of the Project Senior Debt, if needed, as defined below, in connection with the financing of the Company’s installation of 12,000 ton seawater district cooling facility for use at the Baha Mar Resort in Nassau Bahamas (the “Project”). The term of Xxxxxxx Xxxxx’ engagement hereunder shall commence on the date hereof and continue pursuant to Section 5 hereof (the “Term”). The Company and Xxxxxxx Xxxxx are hereinafter each referred to as, a “Party” or collectively as, the “Parties.”

The Project is estimated to have a total capital cost of approximately seventy-eight million U.S. dollars (US$78,000,000) (the “Total Project Costs”) and is expected to be financed on a project-financed basis with the issuance of approximately fifty-eight million U.S. dollars (US$58,000,000) of senior debt (the “Project Senior Debt”) and approximately twenty million U.S. dollars (US$20,000,000) of cash equity (the “Project Equity”).

Xxxxxxx Xxxxx accepts and understands that the timing and delivery of its services under this Agreement are oriented by the milestones set forth in Appendix B.

On the terms and subject to the conditions of this Agreement, Xxxxxxx Xxxxx will provide such financial and market-related advice and assistance as may be necessary and appropriate and mutually agreed upon by the Company and Xxxxxxx Xxxxx, which may include assisting the Company in analyzing, structuring, negotiating, and effecting the Project, including, but not limited to, the preparation and analysis of a financial model for the Project and a review of the Project’s proposed financing structure.

With respect to the Project Senior Debt and the Project Equity, during the Term, and except as acknowledged and agreed in the immediately preceding paragraph, the Company shall not (and shall cause its subsidiaries not to): (i) directly or indirectly (except as otherwise disclosed to and approved in writing by Xxxxxxx Xxxxx) offer any of the Project Senior Debt and the Project Equity, for sale to, or solicit any offer to buy any of the Securities from, or otherwise contact, approach or negotiate with respect thereto with any person or persons except through Xxxxxxx Xxxxx, except those potential financing parties described in Appendix A to this Agreement, which financing parties the Company has had conversations with prior to the date of this Agreement, or (ii) authorize anyone other than Xxxxxxx Xxxxx to act on its behalf in connection with the sale or placement of the Project Senior Debt and/or the Project Equity. The Company shall promptly refer to Xxxxxxx Xxxxx all offers, inquiries and proposals relating to any sale or placement of the Project Senior Debt made to the Company at any time during the Term.

2.             For Xxxxxxx Xxxxx’ services hereunder, the Company agrees to pay fees to Xxxxxxx Xxxxx in cash as follows:

(a)           The Company will pay Xxxxxxx Xxxxx a project advisory fee equal to one percent (1.00%) of the Total Project Costs (the “Project Advisory Fee”), which fee shall be payable in cash when a financial closing of the Project Senior Debt occurs, whether or not physical construction is commenced at that time (the “Financial Closing”). The Project Advisory Fee is payable to Xxxxxxx Xxxxx only and does not include any fees or expenses that may be due to Xxxxxxx Xxxxx as an underwriter of the Project Senior Debt or a third party as a lender.

(b)           Except as provided in Section 2(d), if the Company requests Xxxxxxx Xxxxx to underwrite or place any of the Project Senior Debt, the Company will pay Xxxxxxx Xxxxx a debt financing completion fee equal to two percent (2.00%) of the Project Senior Debt underwritten or placed by Xxxxxxx Xxxxx (the “Debt Financing Completion Fee”), which fee shall be payable in cash when the Financial Closing occurs. The Debt Financing Completion Fee is payable to Xxxxxxx Xxxxx only and does not include any fees or expenses that may be due to a third party as a lender or investor.

(c)           Except as provided in Section 2(d), the Company will pay Xxxxxxx Xxxxx an equity completion fee equal to four percent (4.00%) of the Project Equity identified and placed, which fee shall be payable in cash at the Financial Closing (the “Project Equity Completion Fee”). The Project Equity Completion Fee is payable to Xxxxxxx Xxxxx only and does not include any fees or expenses that may be due to a third party as an investor.

(d)           As an exception to the fees payable pursuant to 2(b) and 2(c) above, if the Company requests Xxxxxxx Xxxxx to underwrite or place any of the Project Senior Debt pursuant to Section 2(b) or to underwrite or place any of the Project Equity pursuant to Section 2(c) and to the extent such placement involves any of the financing parties described in Appendix A of this Agreement (the “Appendix A Parties”), the Company will pay Xxxxxxx Xxxxx a financing completion fee equal to one percent (1.00%) of the Project Senior Debt and/or Project Equity underwritten or placed with Appendix A Parties by Xxxxxxx Xxxxx (also, the “Financing Completion Fee”), which fee shall be payable in cash when the Financial Closing occurs.

(e)           Whether or not any transaction is consummated, in addition to any fees payable to Xxxxxxx Xxxxx, the Company will reimburse Xxxxxxx Xxxxx, upon its request from time to time, for all reasonable, out-of-pocket expenses incurred by it in entering into and performing services pursuant to this Agreement (including coach air travel, reasonable business class hotels, as well as the reasonable fees, disbursements and other charges of its legal counsel retained with the approval of the Company, if any). In no event will Xxxxxxx Xxxxx be responsible for any expenses incurred in connection with the issuance and sale of the Project Senior Debt or the Project Equity including the fees and expenses of underwriters’ counsel, or of any counsel designated by purchasers of the Project Senior Debt to act for them. The Parties understand that Company will want fee estimates for its approval from third party service providers (such as legal counsel), whether such service providers are advising Xxxxxxx Xxxxx or underwriter’s counsel.

For clarity sake, if Xxxxxxx Xxxxx is not requested by the Company to underwrite or place the Project Senior Debt, then Xxxxxxx Xxxxx shall only receive the Project Advisory Fee in addition to the Project Equity Completion Fee, if earned, as compensation.

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3.             Except to the extent legally required (after consultation with Xxxxxxx Xxxxx and its counsel), none of: (i) the name of Xxxxxxx Xxxxx, (ii) any advice rendered by Xxxxxxx Xxxxx to the Company, or (iii) the terms of this Agreement or any communication from Xxxxxxx Xxxxx in connection with the services performed by Xxxxxxx Xxxxx pursuant to this Agreement will be quoted or referred to in writing, or in the case of (ii) and (iii), reproduced or disseminated, by the Company or any of its affiliates or any of their agents, without Xxxxxxx Xxxxx’ prior written consent; provided, however, that the Company may make any disclosures of information about the Project financing plans to its employees, agents, advisors, consultants, subsidiaries, and owners and to potential and actual counterparties, equity investors and Project co-owners as may reasonably be required or appropriate in connection with the Project and the development and financing thereof.

4.             The Company will xxxxxxx Xxxxxxx Xxxxx with such information in the Company’s or its subsidiaries’ possession (and subject to any confidentiality restrictions) as Xxxxxxx Xxxxx reasonably believes appropriate to its assignment (all such information so furnished being the “Information”). The Company recognizes and confirms that Xxxxxxx Xxxxx: (i) will use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having assumed responsibility for independently verifying the same, (ii) does not assume responsibility for the accuracy, completeness or reasonableness of the Information and such other information, and (iii) will not make an appraisal of any assets or liabilities (contingent or otherwise) of the Company. To the best of the Company’s knowledge, the information to be furnished by or on behalf of the Company, when delivered, will be true and correct in all material respects and will not contain any material misstatement of fact or omit to state any material fact necessary to make the statements contained therein not misleading. The Company will promptly notify Xxxxxxx Xxxxx if it learns of any material inaccuracy or misstatement in, or material omission from, any Information previously delivered to Xxxxxxx Xxxxx.

5.             Xxxxxxx Xxxxx’ services hereunder may be terminated for convenience by the Company at any time at the Company’s sole and absolute discretion (“Termination for Convenience”). Any such termination shall be effected by a written notice from the Company to Xxxxxxx Xxxxx that this Agreement is terminated and the date upon which such termination becomes effective. Upon written termination to Xxxxxxx Xxxxx, the Company agrees to the payment of termination fee provided for in Section 6. The Termination Payment shall be deemed a liquidated damages payment and not a penalty. The Company’s payment of the termination fee shall be the sole and exclusive liability of the Company and the sole and exclusive remedy of Xxxxxxx Xxxxx with respect to the termination of the Agreement pursuant to this Section.

6.             In addition to the Company’s right to terminate this Agreement pursuant to Section 5, Xxxxxxx Xxxxx’ services hereunder may be terminated by the Company or Xxxxxxx Xxxxx upon thirty (30) days’ prior written notice and, except as expressly stated in Section 2(e) above and below in this Section 6, without liability or continuing obligation of the Company or Xxxxxxx Xxxxx; however, in the event that the termination of Xxxxxxx Xxxxx’ services hereunder is made by the Company without Cause (as defined below), the Company or any of its subsidiaries agrees to, announces or enters into a binding definitive agreement in respect of an Alternative Transaction (as defined below), the Company shall pay Xxxxxxx Xxxxx a termination fee equal to fifty thousand U.S. dollars (US$50,000) for each month from the date hereof until the date of termination up to a maximum of the Project Advisory Fee identified in Section 2(a), together with reimbursement of all of Xxxxxxx Xxxxx’ expenses and disbursements pursuant to Section 2(e), which fee shall become payable in full in all cases upon closing of the Alternative Transaction, as applicable, and provided that Sections 2(e), 3, 6, 7, 9, 10, 11, and 12 hereof shall remain operative and in full force and effect regardless of any termination or expiration of this Agreement. For purposes of this Section 6, “Cause” shall mean conduct by Xxxxxxx Xxxxx in performing this engagement that constitutes gross negligence or willful misconduct and which has not been redressed by Xxxxxxx Xxxxx in good faith after twenty (20) days’ written notice from the Company specifying that the Company believes that such conduct constitutes “Cause.” To be clear, failure to meet a milestone provided for in Appendix B shall not, in of itself, constitute “Cause.” For purposes of this Section 6, an “Alternative Transaction” means a transaction for the financing of the Project by the Company or one or more of its subsidiaries, other than the Project Senior Debt contemplated herein.

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Any Termination Fee payable under this Section 6 will constitute liquidated damages of Xxxxxxx Xxxxx and will not constitute a penalty.

7.             Xxxxxxx Xxxxx xxx, at its own expense, place customary tombstone announcements or advertisements in financial newspapers and journals describing its services hereunder, subject to the Company’s approval, which shall not be unreasonably withheld.

8.             The Company acknowledges and agrees that Xxxxxxx Xxxxx has been retained to act solely as an advisor to the Company, and not as an advisor to any other person, and the Company’s engagement of Xxxxxxx Xxxxx is not intended to confer rights upon any person (including shareholders, employees or creditors of the Company) not a party hereto as against Xxxxxxx Xxxxx or its affiliates, or their respective directors, officers, employees or agents, successors, or assigns. Xxxxxxx Xxxxx shall act as an independent contractor under this Agreement, and not in any other capacity including as a fiduciary, and any duties arising out of its engagement shall be owed solely to the Company.

9.             Xxxxxxx Xxxxx and its affiliates are involved in a wide range of activities from which conflicting interests or duties may arise. Information which is held elsewhere within Xxxxxxx Xxxxx but of which none of the individuals of Xxxxxxx Xxxxx involved in providing the services contemplated by this engagement actually has knowledge, will not for any purpose be taken into account in determining Xxxxxxx Xxxxx’ responsibilities to the Company under this engagement. Xxxxxxx Xxxxx will not have any duty to disclose to the Company or utilize for the Company’s benefit any non-public information acquired in the course of providing services to any other person, engaging in any transaction (on its own account or otherwise) or otherwise carrying on its business.

10.           The Company agrees to the indemnification and other agreements set forth in the Indemnification Agreement attached hereto, the provisions of which are incorporated herein by reference and shall survive the termination, expiration, or supersession of this Agreement.

11.           (i)            This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this agreement (“claim”), directly or indirectly, shall be governed by and construed in accordance with the laws of the State of New York without reference to any conflicts of law rules that would require the application of a different state’s law. The Company and Xxxxxxx Xxxxx shall attempt in good faith to settle any claim or controversy arising out of, or relating to, this agreement through consultation and negotiation, in good faith and a spirit of mutual cooperation. If those attempts fail, either Party may demand that the dispute be arbitrated, in New York, New York, by three arbitrators in accordance with the commercial arbitration rules of the American Arbitration Association. The panel shall not have the power to award any incidental, consequential, exemplary, punitive, or like damages, but may award attorney’s fees to either Party. Each Party shall bear all of its own expenses and pay one-half of the fees and expenses of the arbitration. The decision of the panel shall be final and binding and may be enforced in any court of competent jurisdiction. The decision of the panel shall be in writing. Except for claims of indemnification pursuant to the indemnification agreement, the procedure set forth in this Section 10(a) is the exclusive means for resolving any dispute between the Parties arising out of, or relating to, this agreement, and neither Party may initiate or maintain any proceeding in any court or similar tribunal relating to any dispute under this agreement; provided that either Party may seek equitable relief to the extent reasonably necessary to protect its rights under this Agreement. The Company and Xxxxxxx Xxxxx agree that the courts of the State of New York shall have jurisdiction over the enforcement/adjudication of such matters, and the Company and Xxxxxxx Xxxxx consent to the jurisdiction of such courts and personal service with respect thereto.

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(ii)            As an explicit exception to the terms of Section 10(i), above, the Company hereby consents to personal jurisdiction, service and venue in any court in which any claim arising out of or in any way relating to this agreement is brought by any third party (“Third Party Proceeding”) against Xxxxxxx Xxxxx or any indemnified party. Each of Xxxxxxx Xxxxx and the Company waives all right to trial by jury in any Third Party Proceeding (whether based upon contract, tort or otherwise) arising out of or in any way relating to this Agreement. The Company agrees that a final judgment in any third party proceeding arising out of or in any way relating to this agreement brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts the jurisdiction of which the Company is or may be subject, by suit upon such judgment.

12.           This Agreement (including the attached Indemnification Agreement) embodies the entire agreement and understanding between the Parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both Xxxxxxx Xxxxx and the Company. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement.

This Agreement shall be binding upon the Company and Xxxxxxx Xxxxx and their respective successors and assigns.

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below, whereupon this Agreement and your acceptance shall constitute a binding agreement between us.

Very truly yours,

XXXXXXX XXXXX & ASSOCIATES, INC.

By: /s/ Xxxxxx Xxxxx

Name: Xxxxxx Xxxxx

Title: Managing Director

Accepted and agreed to as of the date first above written:

OCEAN THERMAL ENERGY CORPORATION

By: /s/ Xxxxxx X. Xxxxxxx

Name: Xxxxxx X. Xxxxxxx

Title: Chairman of the Board and Chief Executive Officer

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Ocean Thermal Energy Corporation

Baha Mar SDC Project

APPENDIX A

Financing Parties Contacted by OTE Corporation

Gottex

Inter-American Development Bank

Barclays Capital

Macquarie Cook Power (Houston)

Vantage Point Venture Partners

Kairos Energy Capital

Xxxxxx Xxxxxx Jurvetson (DFJ)

Starwood

Koiohala Ventures

Blue Hill Partners

EIG Global Energy Partners (formerly TCW Trust Company of the West)

BNP Paribas

GE Energy Finance

Citigroup

First Reserve Corp

Riverstone Holdings

D E Shaw (Laminar)

Scocia Capital

BTMU Capital

NGP Capital Resources Company

Quantum Energy Partners

Chevron Technology Ventures

Siemens Venture Capital

Commercial Funding International

Imperial Capital

HSBC

Somerset Capital

Corix

OPIC

EXIM

Standard Bank

Blackrock

Xxxxxx Capital

Xxxxxx Cleantech

Deutsche Bank

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Ocean Thermal Energy Corporation

Baha Mar SDC Project

APPENDIX B

Milestones

1. Conditional financing commitment letter delivered to the Company by Xxxxxxx Xxxxx by no later than Friday, April 1, 2011.

2. Xxxxxxx Xxxxx’ recommended plan of finance delivered to the Company within approximately thirty (30) calendar days after the Build, Operate, Own and Transfer Agreement (the “BOOT Agreement”) is finalized.

3. Selection and engagement of placement and debt counsel by within approximately thirty (30) calendar days after the BOOT Agreement is finalized.

4. Kick-off meeting, defined as the event where representatives of OTEC, all vital financing counsel and consultants are present with the intention of discussing the plan of finance, expected documentation and financing schedule, within approximately ten (10) business days after the BOOT Agreement is finalized (the “Kick-off Meeting”).

5. Environmental comfort letter, draft Engineering, Procurement and Construction Agreement and Operations and Maintenance agreements executed by within approximately thirty (30) calendar days after the BOOT Agreement is finalized.

6. First draft of offering memorandum due within approximately twenty (20) calendar days after the Kick-off Meeting.

7. Marketing commences upon the working groups’ agreement that all documentation is acceptable.

8. Marketing closes upon the formal declaration of the pricing period and documents finalized between the period from the formal award and financial closing of the debt.

If the Boot Agreement is materially delayed, then the milestone dates above shall be postponed day for day accordingly. Debt finance completion is expected within approximately thirty (30) days after receipt of all permits and approvals required to commence construction.

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