CREDIT AGREEMENT AND PROMISSORY NOTE
CLEAN ENERGY TECHNOLOGIES, INC.
CREDIT AGREEMENT AND PROMISSORY NOTE
This CREDIT AGREEMENT AND PROMISSORY NOTE (this “Agreement”) dated as of December
31, 2016 is made by and between Clean Energy Technologies, Inc., a Nevada corporation (the
“Company”) and Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability
company in formation (“Lender”).
RECITALS
WHEREAS on or about March 15, 2016 the Company and Peak One Opportunity Fund, L.P., a
Delaware limited partnership (“Peak One”) entered into a Securities Purchase Agreement dated March
11, 2016 (the “SPA”).
WHEREAS pursuant to the SPA, on March 15, 2016 Peak One subscribed for and purchased
from the Company and the Company issued to Peak One a Convertible Debenture dated March 15,
2016 in the original stated principal amount of $75,000.00 (the “Peak One Debenture”).
WHEREAS the Company issued a notice of redemption of the Peak One Debenture and, pursuant
to an Escrow Funding Agreement, the Company assigned its rights under such redemption to Red Dot
Investment, Inc., a California corporation (“Red Dot”), Red Dot acquired the Peak One Debenture, and
the Company and Red Dot or an associate of Red Dot amended the Peak One debenture as held by Red
Dot (or such associate) (the Peak One Debenture, as so amended, the “Master Debenture”).
WHEREAS Lender has acquired the Master Debenture from Red Dot.
WHEREAS on or about June 6, 2016, July 6, 2016, and August 15, 2016, respectively, the
Company issued the following securities (collectively the “Notes”): (1) a 12% Convertible Note in the
original principal amount of $87,500.00 to EMA Financial, LLC, a Delaware limited liability company
(“EMA”), (2) a Convertible Promissory Note in the original principal amount of $77,750.00 to Auctus
Fund LLC, a Delaware limited liability company (“Auctus”), and (3) a 12% Convertible Promissory
Note in the original principal amount of $57,000.00 to JSJ Investments, Inc., a Texas corporation
(“JSJ” and, together with Auctus and EMA, the “Additional Noteholders”) .
WHEREAS the Company intends to redeem all of the Notes or to repay all or substantially all of
the amounts owed to the Additional Noteholders under the Notes, pursuant to which the Company will
pay amounts of $89,401.98, $97,506.38 and $86,079.37, respectively (the “Note Payment Amounts”).
WHEREAS the Company does not presently have the funds to pay the Note Payment Amounts.
WHEREAS the Company would like to borrow additional amounts from the Lender for the
Company’s operating capital needs (“Additional Advance Amounts”), which advances would be at the
sole and absolute discretion of Lender.
WHEREAS Lender has deposited in escrow with ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP (the “Escrow
Holder”) certain funds that may be advanced to or for the benefit of the Company as Note Payment
Amounts or as Additional Advance Amounts (the “Escrow”).
WHEREAS, as a condition to the advance of any amount from Escrow relating to Note Payment
Amounts, the Company agrees to assign to Lender all of the Company’s rights to redeem, repurchase,
reacquire, repay or otherwise satisfy any associated Note and agrees that Lender shall otherwise be
subrogated to all of the rights of the lender under any Note repaid with funds advanced by Lender.
WHEREAS, pursuant to the instructions of Lender and the Company contained herein, Lender
and the Company are instructing the Escrow Holder to disburse funds from the Escrow to fund the
entirety of the Note Payment Amounts and all costs, expenses, fees or other charges arising in
connection with or relating to the Notes or payment of the Note Payment Amounts, the assignment of
the Company’s rights relating thereto, the amendment thereof once acquired by Lender, this
Agreement, the transactions contemplated herein, including the Financing Fee (as defined below) and
any costs, expenses, or other fees relating to the Notes, payment of the Note Payment Amounts, or the
enforcement or collection of any amounts advanced hereunder, and any other expense for or on account
of the Company for which an agent of the Company may request an advance, provided such advance
is approved by Lender, Red Dot, the Executive Chairman of the Company, or the Escrow Holder
(collectively, the “Ancillary Note Expenses”).
WHEREAS, pursuant to additional instructions of Lender or Red Dot, as Lender’s agent hereby
expressly authorized for such purpose, Lender may further instruct the Escrow Holder to disburse funds
from the Escrow to fund Additional Advance Amounts and any and all costs, expenses, fees or other
charges arising in connection with or relating to such Additional Advance Amounts or repayment of
the Additional Advance Amounts, this Agreement, the transactions contemplated herein, including the
Financing Fee and any costs, expenses, or other fees relating to the Additional Advance Amounts,
repayment of the Additional Advance Amounts, or the enforcement or collection of any amounts
advanced hereunder, and any other expense for or on account of the Company for which an agent of
the Company may request an advance, provided such advance is approved by Lender or Red Dot, as
Lender’s agent hereby expressly authorized for such purpose (collectively, the “Ancillary Advance
Expenses” and, together with the Ancillary Note Expenses, the “Ancillary Expenses”).
WHEREAS Lender and the Company have agreed that Lender will, where possible, acquire the
rights of the Company with respect to any Note and acquire any acquired Note through Escrow or will
otherwise be subrogated to the rights of any Note holder and that Lender will not purchase such Note
from the Company; provided, however, that where such an assignment of rights and acquisition of an
outstanding Note is not possible, then Lender shall be so subrogated and the amount and rights of such
Note Payment Amounts and Ancillary Note Expenses shall be deemed an additional advance under the
Master Debenture and such Note Payment Amounts shall be added to the outstanding principal of the
Master Debenture.
WHEREAS Lender and the Company have agreed that Lender is acquiring any Note acquired as
a good faith purchaser for value and a holder in due course, but Lender does not acquire any Note with
any representation or warranty from an Additional Noteholder other than as implied by the Additional
Noteholder to the Company, as assignor, with respect to its ownership of the Note.
WHEREAS Lender and the Company have agreed to amend any acquired Note or the subrogated
rights of Lender in respect thereof, once acquired by Lender or once Lender is subrogated thereto, (a)
to have a fixed conversion price of $.005 per share, subject to the provisions for adjustment provided
for in the Master Debenture, as amended, (b) to have a fixed interest rate of ten percent (10%) per
annum with respect to both the Note Payment Amount and any Ancillary Note Expenses (in each case
with a minimum 10% yield in the event of payoff or conversion within the first year), as provided
herein, all such expenses to be for the account of and the responsibility of the Company,
notwithstanding that Lender may advance sums to pay for them, the amount of such Ancillary Note
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Expenses to constitute additional principal under the a Note so acquired, as amended, and (c) as
otherwise provided herein.
WHEREAS Lender and the Company have agreed that, with respect to any Note Advance
Amount or Ancillary Note Expense that relates to a Note that is not acquired by Lender, such amounts
shall be added to the principal amount of the Master Debenture.
WHEREAS Lender and the Company have agreed that, with any Additional Advance Amount
or Ancillary Advance Expense shall be added to the principal amount of the Master Debenture.
WHEREAS Lender and the Company have further agreed that, in the event Lender is not the
holder of the Master Debenture, this Agreement shall constitute a Promissory Note with terms and
conditions identical to the Master Debenture, mutatis mutandis. In such event, any references herein
to the Master Debenture shall be to this Agreement, mutatis mutandis.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to agree as
follows:
1.
Recitals; Terms. The foregoign Recitals are incorproated ▇▇▇▇▇ by refernce as if set
forth fully herein and, in accodance with Section 622 of the California Evidence Code, the facts recited
in the Recitals are conclusively presumed to be true as between the parties hereto, or their successors
in interest. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed
thereto in the Master Debenture (including any terms incorproated by reference therein).
2.
Escrow Deposit; Note Assignment; Promise to Pay.
(a)
Lender has designated and hereby reaffirms such designation, from funds on
deposit in Escrow with the Escrow Holder, sufficient funds to pay the Note Payment Amounts
and pay any Ancillary Note Expenses. The total of such amounts (the “Additional Owed
Principal Amount”) shall be as set forth in a schedule (the “Loan Schedule”) prepared and
updated by Lender or Red Dot, as Lender’s agent hereby expressly authorized for such purpose,
from time to time and that may be appended or re-appended by Lender or Red Dot, as Lender’s
agent hereby expressly authorized for such purpose, to the Master Debenture (or a copy thereof
if Lender does not receive the original of the Master Debenture). The parties agree that the
Loan Schedule, as prepared by Lender or Red Dot, as Lender’s agent hereby expressly
authorized for such purpose, from time to time and whether or not appended to the Master
Debenture (or a copy thereof), shall conclusive evidence of the Additional Owed Principal
Amount.
(b)
The Company represents and warrants to Lender that the Company has or will
reach consensual terms with the Additional Noteholders for redemption or repayment of the
Notes.
(c)
To the maximum extent possible, the Company hereby assign to Lender all of
the Company’s rights to repurchase the Notes and otherwise agrees that Lender shall be
subrogated to the rights of any Note prepaid with funds advanced by Lender.
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(d)
To induce Lender to acquire or repay the Notes, the Company agrees to pay to
Lender a fee of $10,000.00 (the “Financing Fee”) with respect to the Note Payment Amount
of each Note and each Additional Advance Amount, with the amount of the Financing Fee to
be included as an Ancillary Expenses.
(e)
In consideration of the foregoing, the Company hereby agrees to repay to
Lender, in accordance with the terms and conditions of the Master Debenture, the Additional
Owed Principal Amount, together with interest accrued thereon and other amounts owing in
connection therewith, as any such amounts be due and owing and whether or not reflected in
the Loan Schedule.
3.
Escrow Deposit; Additional Advance Amounts; Promise to Pay.
(a)
Lender, directly or through its agent hereby expressly authorized therefor, Red
Dot, may designate, from funds on deposit in Escrow with the Escrow Holder, funds to pay
Additional Payment Amounts and Ancillary Additional Expenses. The total of such amounts
(the “Second Additional Owed Principal Amount”) shall be as set forth in the Loan Schedule
prepared and updated by Lender or Red Dot from time to time and that may be appended or
re-appended to the Master Debenture (or a copy thereof, including if Lender does not receive
the original of the Master Debenture). The parties agree that the Loan Schedule, as prepared
by Lender or Red Dot, as Lender’s agent hereby expressly authorized for such purpose, from
time to time and whether or not appended to the Master Debenture (or a copy thereof), shall
conclusive evidence of the Second Additional Owed Principal Amount.
(b)
In consideration of the foregoing, the Company hereby agrees to repay to
Lender, in accordance with the terms and conditions of the Master Debenture, the Second
Additional Owed Principal Amount, together with interest accrued thereon and other amounts
owing in connection therewith, as any such amounts be due and owing and whether or not
reflected in the Loan Schedule.
4.
Note Escrow Instruction. Lender and the Company hereby jointly instruct the Escrow
Holder to disburse funds from the Escrow to fund the entirety of the Note Payment Amounts and to
pay from the Escrow Account any and all Ancillary Note Expenses, inculding the legal expenses
incurred in connection with the preparation of this Agreement and the expenses of the Escrow Holder.
At the request of the Escrow Holder, Lender or Red Dot, as Lender’s agent hereby expressly authorized
for such purpose, shall confirm in writing the Escrow Holder’s payment of Ancillary Note Expenses
and Escrow Holder’s authortiy threfor, though no such confirmation shall be required, it being agreed
between the parties that the Escrow Holder shall have the authority to pay such expenses as they are
invoiced.
5.
Additional Advance Escrow Instructions. Lender, directly or through its agent
hereby expressly authorized therefor, Red Dot, may in the future instruct the Escrow Holder to disburse
funds from the Escrow to fund Additional Advance Amounts and to pay from the Escrow Account
Ancillary Additional Expenses, inculding the legal expenses and the expenses of the Escrow Holder.
6.
Events of Default. In addition to the Events of Default listed in the Master Debenture,
the occurrence of any of the following shall also constitute an “Event of Default” under the Master
Debenture and this Agreement:
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(a)
Failure to Pay. The Company shall fail to pay when due any outstanding
amount owed under the Master Debenture;
(b)
Cross Default. A default shall occur in any other obligation of the Company
to pay money or to perform an obligation when due;
(c)
Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i)
apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors,
(iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under
any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary case or other proceeding commenced
against it, or (vii) take any action for the purpose of effecting any of the foregoing; or
(d)
Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the
appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part
of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within thirty (30) days of commencement.
7.
Rights of Lender upon Default. In addition to any remedies listed in the Master
Debenture or available at law or in equity, upon the occurrence and during the continuance of any
Event of Default (and giving effect to any applicable cure periods) and at any time thereafter during
the continuance of such Event of Default, Lender may declare all amounts payable under the Master
Debenture to be and become immediately due and payable, whereupon such amounts shall be
immediately due and payable in full. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, Lender may exercise any other right power or remedy otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
8.
No Assignment by the Company. Neither this Agreement nor the Master Debenture
nor any of the rights, interests, or obligations of the Company hereunder or thereunder may be assigned,
in whole or in part, by the Company, including by operaiton of law, without the prior written consent
of Lender.
9.
Waiver and Amendment. Any provision of this Agreement may be amended,
waived, or modified upon the written consent of Company and the Lender, directly or through its agent
hereby expressly authorized therefor, Red Dot.
10.
Notices.
All notices, requests, demands, consents, instructions, or other
communications required or permitted hereunder shall be in writing and faxed, emailed, mailed, or
delivered to each party at the respective addresses of the parties provided for such purpose. All such
notices and communications will be deemed given when sent to an address of the reciptient. Any party
hereto may by notice so given change its address for future notice hereunder.
11.
Payment. Payment shall be made in lawful tender of the United States.
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12.
Expenses. If action is instituted to collect on the Master Debenture or to enforce any
right under this Agreement, the prevailing party shall pay all costs and expenses, including, without
limitation, attorneys’ fees and costs, incurred in connection with such action.
13.
Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof.
14.
Arbitration; Waiver of Right to Trial by Jury. Any dispute, controversy or claim
arising from or connected with this Agreement, including one regarding the existence, validity or
performance of this Agreement or the Master Debenture (a “Dispute”) shall be referred to and finally
resolved by arbitration under the expedited commercial arbitration rules of Pan Pacific Arbitration.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
MASTER DEBENTURE, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
15.
Usury Limitations. It is the intention of the Company and Lender to conform strictly
to applicable usury laws. Accordingly, notwithstanding anything to the contrary in this Agreement or
the Master Debenture, amounts deemed to constitute interest under applicable law and contracted for,
chargeable, or receivable under this Agreement or under the Master Debenture shall under no
circumstances, together with any other interest, late charges, or other amounts which may be
interpreted to be interest contracted for, chargeable, or receivable hereunder or thereunder, exceed the
maximum amount of interest permitted by law, and in the event any amounts were to exceed the
maximum amount of interest permitted by law, such excess amounts shall be deemed a mistake and
shall either be reduced immediately and automatically to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled automatically and, if theretofore paid, at the option
of Lender, be refunded to the Company or credited on the principal amount of the Master Debenture
then outstanding.
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IN WITNESS WHEREOF, the Company and Lender have each caused this Credit Agreement and
Promissory Note to signed by their duly appointed and authorized officers as the act and deed of such
company as of the date first written above.
CLEAN ENERGY TECHNOGIES, INC.,
a Nevada corporation
By:
▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
MEGAWELL USA TECHNOLOGY
INVESTMENT FUND I LLC,
a Wyoming limited liability company in formation
By:
▇▇▇▇▇▇ ▇▇
Managing Director
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