AMENDED AND RESTATED SECURED CONVERTIBLE MINIMUM BORROWING NOTE
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO AMERICAN TECHNOLOGIES GROUP, INC. THAT SUCH REGISTRATION IS
NOT
REQUIRED.
AMENDED
AND RESTATED
FOR
VALUE
RECEIVED, each of AMERICAN TECHNOLOGIES GROUP, INC., a Nevada corporation (the
“Parent”),
and
the other companies listed on Exhibit
A
attached
hereto (such other companies together with the Parent, each a “Company”
and
collectively, the “Companies”),
jointly and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, ▇▇▇▇▇▇ House, South Church Street,
▇▇▇▇▇▇ Town, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the “Holder”)
or its
registered assigns or successors in interest, the sum of Three Million Dollars
($3,000,000), or, if different, the aggregate principal amount of all Loans
(as
defined in the Security Agreement referred to below), together with any accrued
and unpaid interest hereon, on September 6, 2008 (the “Maturity
Date”)
if not
sooner paid.
This
Amended and Restated Secured Convertible Minimum Borrowing Note (this
“Note”)
is
intended to be a registered obligation within the meaning of Treasury Regulation
Section 1.871-14(c)(1)(i) and each Company (or its agent) shall register this
Note (and thereafter shall maintain such registration) as to both principal
and
any stated interest. Notwithstanding any document, instrument or agreement
relating to this Note to the contrary, transfer of this Note (or the right
to
any payments of principal or stated interest thereunder) may only be effected
by
(i) surrender of this Note and either the reissuance by the Company of this
Note
to the new holder or the issuance by the Company of a new instrument to the
new
holder, or (ii) transfer through a book entry system maintained by the Company
(or its agent), within the meaning of Treasury Regulation Section
1.871-14(c)(1)(i)(B).
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain ▇▇▇▇▇▇▇ and Restated Security Agreement dated as of
January 31, 2007 by and among the Companies and the Holder (as amended,
restated, modified and/or supplemented from time to time, the “Security
Agreement”).
The
following terms shall apply to this Note:
1
ARTICLE
I
CONTRACT
RATE
1.1 Contract
Rate.
Subject
to Sections 4.2 and 5.10, interest payable on the outstanding principal amount
of this Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to the “prime rate” published in The
Wall Street Journal
from
time to time (the “Prime
Rate”),
plus
two percent (2%) (the “Contract
Rate”).
The
Contract Rate shall be increased or decreased as the case may be for each
increase or decrease in the Prime Rate in an amount equal to such increase
or
decrease in the Prime Rate; each change to be effective as of the day of the
change in the Prime Rate. The Contract Rate shall not at any time be less than
eight and one-quarter of one percent (8.25%). Interest shall be (i) calculated
on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing
on September 1, 2005 on the first business day of each consecutive calendar
month thereafter through and including the Maturity Date and on the Maturity
Date, whether by acceleration or otherwise.
1.2 Contract
Rate Adjustments and Payments.
The
Contract Rate shall be calculated on the last business day of each calendar
month hereafter (other than for increases or decreases in the Prime Rate which
shall be calculated and become effective in accordance with the terms of Section
1.1) until the Maturity Date (each a “Determination
Date”)
and
shall be subject to adjustment as set forth herein.
ARTICLE
II
LOANS;
PAYMENTS UNDER THIS NOTE
2.1 Loans.
All
Revolving Loans evidenced by this Note shall be made in accordance with the
terms and provisions of the Security Agreement.
2.2 No
Effective Registration.
Notwithstanding anything to the contrary herein, the Holder shall not be
required to accept shares of Common Stock as payment following a conversion
by
the Holder if there fails to exist an effective current Registration Statement
(as defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued, or if an Event of Default hereunder exists and is
continuing, unless such requirement is otherwise waived in writing by the Holder
in whole or in part at the Holder’s option.
2.3 Optional
Redemption in Cash.
The
Companies will have the option of prepaying this Note (“Optional
Redemption”)
by
paying to the Holder a sum of money equal to one hundred twenty percent (120%)
of the principal amount of this Note together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder arising
under this Note, the Security Agreement, or any other Ancillary Agreement (the
“Redemption
Amount”)
outstanding on the Redemption Payment Date (as defined below). The Parent shall
deliver to the Holder a written notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be seven (7) days after the date of the Notice of Redemption (the
“Redemption
Period”).
A
Notice of Redemption shall not be effective with respect to any portion of
this
Note for which the Holder has previously delivered a Notice of Conversion
(defined below) pursuant to Section 3.1, or for conversions elected to be made
by the Holder pursuant to Section 3.1 during the Redemption Period. The
Redemption Amount shall be determined as if such ▇▇▇▇▇▇’s conversion elections
had been completed immediately prior to the date of the Notice of Redemption.
On
the Redemption Payment Date, the Redemption Amount (plus any additional interest
and fees accruing on the Notes during the Redemption Period) must be irrevocably
paid in full in immediately available funds to the Holder. In the event the
Companies fail to pay the Redemption Amount on the Redemption Payment Date,
then
such Redemption Notice shall be null and void.
2
ARTICLE
III
CONVERSION
RIGHTS AND FIXED CONVERSION PRICE
3.1 Optional
Conversion.
Subject
to the terms of this Article III, the Holder shall have the right, but not
the
obligation, at any time until the Maturity Date, or during an Event of Default
(as defined in Article IV), and, subject to the limitations set forth in Section
3.2 hereof, to convert all or any portion of the outstanding Principal Amount
and/or accrued interest and fees due and payable into fully paid and
nonassessable shares of the Common Stock at the Fixed Conversion Price. For
purposes hereof, subject to Section 3.6 hereof, the initial “Fixed
Conversion Price”
means
$0.333. The shares of Common Stock to be issued upon such conversion are herein
referred to as the “Conversion
Shares.”
3.2 Conversion
Limitation.
Notwithstanding anything contained herein to the contrary, the Holder shall
not
be entitled to convert pursuant to the terms of this Note an amount that would
be convertible into that number of Conversion Shares which would exceed the
difference between (i) 4.99% of the outstanding shares of Common Stock and
(ii)
the number of shares of Common Stock beneficially owned by the Holder. For
purposes of the immediately preceding sentence, beneficial ownership shall
be
determined in accordance with Section 13(d) of the Exchange Act and Regulation
13d-3 thereunder. The Conversion Shares limitation described in this Section
3.2
shall automatically become null and void following notice to any Company upon
the occurrence and during the continuance of an Event of Default, or upon 75
days prior notice to the Parent. Notwithstanding anything contained herein
to
the contrary, the provisions of this Section 3.2 are irrevocable and may not
be
waived by the Holder or any Company.
3.3 Mechanics
of ▇▇▇▇▇▇’s Conversion.
In the
event that the Holder elects to convert this Note into Common Stock of the
Parent, the Holder shall give notice of such election by delivering an executed
and completed notice of conversion in substantially the form of Exhibit
A
hereto
(appropriately completed) (“Notice
of Conversion”)
to
such Notice of Conversion shall provide a breakdown in reasonable detail of
the
Principal Amount, accrued interest and fees that are being converted. On each
Conversion Date (as hereinafter defined) and in accordance with its Notice
of
Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Parent within two (2) Business Days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Parent in accordance with the provisions hereof shall be
deemed a Conversion Date (the “Conversion
Date”).
Pursuant to the terms of the Notice of Conversion, the Parent will issue
instructions to the transfer agent accompanied by an opinion of counsel within
one (1) Business Day of the date of the delivery to the Parent of the Notice
of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of
the
Holder’s designated broker with the Depository Trust Corporation (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
within three (3) Business Days after receipt by the Parent of the Notice of
Conversion (the “Delivery
Date”).
In
the case of the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been issued upon
the date of receipt by the Parent of the Notice of Conversion. The Holder shall
be treated for all purposes as the record holder of the Conversion Shares,
unless the Holder provides the applicable Company written instructions to the
contrary.
3
3.4 Late
Payments.
Each
Company understands that a delay in the delivery of the Conversion Shares in
the
form required pursuant to this Article beyond the Delivery Date could result
in
economic loss to the Holder. As compensation to the Holder for such loss, in
addition to all other rights and remedies which the Holder may have under this
Note, applicable law or otherwise, the Companies shall, jointly and severally,
pay late payments to the Holder for any late issuance of Conversion Shares
in
the form required pursuant to this Article III upon conversion of this Note,
in
the amount equal to $500 per Business Day after the Delivery Date. The Companies
shall, jointly and severally, make any payments incurred under this Section
in
immediately available funds upon demand.
3.5 Conversion
Mechanics.
The
number of shares of Common Stock to be issued upon each conversion of this
Note
shall be determined by dividing that portion of the principal and interest
and
fees to be converted, if any, by the then applicable Fixed Conversion
Price.
3.6 Adjustment
Provisions.
The
Fixed Conversion Price and number and kind of shares or other securities to
be
issued upon conversion determined pursuant to Section 3.1 shall be subject
to
adjustment from time to time upon the occurrence of certain events during the
period that this conversion right remains outstanding, as follows:
(a) Reclassification.
If the
Parent at any time shall, by reclassification or otherwise, change the Common
Stock into the same or a different number of securities of any class or classes,
this Note, as to the unpaid Principal Amount and accrued interest thereon,
shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock (i) immediately prior to or
(ii)
immediately after such reclassification or other change at the sole election
of
the Holder.
(b) Stock
Splits, Combinations and Dividends.
If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
or any preferred stock issued by the Parent in shares of Common Stock, the
Fixed
Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares
of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such
event.
4
3.7 Reservation
of Shares.
During
the period the conversion right exists, the Parent will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Conversion Shares upon the full conversion of this Note,
the
Warrants and the Options. The Parent represents that upon issuance, the
Conversion Shares will be duly and validly issued, fully paid and
non-assessable. The Parent agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who
are
charged with the duty of executing and issuing stock certificates to execute
and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration
Rights.
The
Holder has been granted registration rights with respect to the Conversion
Shares as set forth in a Registration Rights Agreement.
3.9 Issuance
of New Note.
Upon
any partial conversion of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be issued by the
Companies to the Holder for the principal balance of this Note and interest
which shall not have been converted or paid. Subject to the provisions of
Article IV of this Note, the Companies shall not pay any costs, fees or any
other consideration to the Holder for the production and issuance of a new
Note.
ARTICLE
IV
EVENTS
OF DEFAULT AND DEFAULT RELATED PROVISIONS
4.1 Events
of Default.
The
occurrence of an Event of Default under the Security Agreement shall constitute
an event of default (“Event
of Default”)
hereunder.
4.2 Default
Interest.
Following the occurrence and during the continuance of an Event of Default,
the
Companies shall, jointly and severally, pay additional interest on the
outstanding principal balance of this Note in an amount equal to the Contract
Rate plus ten percent (10%) per annum, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.
4.3 Default
Payment.
Following the occurrence and during the continuance of an Event of Default,
the
Holder, at its option, may elect, in addition to all rights and remedies of
the
Holder under the Security Agreement and the Ancillary Agreements and all
obligations of each Company under the Security Agreement and the Ancillary
Agreements, to require the Companies, jointly and severally, to make a Default
Payment (“Default
Payment”).
The
Default Payment shall be 130% of the outstanding principal amount of the Note,
plus accrued but unpaid interest, all other fees then remaining unpaid, and
all
other amounts payable hereunder. The Default Payment shall be applied first
to
any fees due and payable to the Holder pursuant to the Notes and/or the
Ancillary Agreements, then to accrued and unpaid interest due on the Notes,
the
Security Agreement and then to the outstanding principal balance of the Notes.
The Default Payment shall be due and payable immediately on the date that the
Holder has exercised its rights pursuant to this Section 4.3.
5
ARTICLE
V
MISCELLANEOUS
5.1 Conversion
Privileges.
The
conversion privileges set forth in Article III shall remain in full force and
effect immediately from the date hereof until the date this Note is indefeasibly
paid in full and irrevocably terminated.
5.2 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
5.3 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder hereof in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing hereunder are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
5.4 Notices.
Any
notice herein required or permitted to be given shall be in writing and provided
in accordance with the terms of the Security Agreement.
5.5 Amendment
Provision.
The
term “Note” and all references thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented, and any successor instrument
as such successor instrument may be amended or supplemented.
5.6 Assignability.
This
Note shall be binding upon each Company and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and assigns, and
may
be assigned by the Holder in accordance with the requirements of the Security
Agreement. No Company may assign any of its obligations under this Note without
the prior written consent of the Holder, any such purported assignment without
such consent being null and void.
5.7 Cost
of Collection.
In case
of any Event of Default under this Note, the Companies shall, jointly and
severally, pay the Holder’s reasonable costs of collection, including reasonable
attorneys’ fees.
5.8 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
6
(b) EACH
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY
AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING
OUT
OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
AGREEMENTS; PROVIDED,
THAT
EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK;
AND FURTHER PROVIDED,
THAT
NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS.
EACH
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT
AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
(c) EACH
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS
TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR
ANY
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY
AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO
OR
THERETO.
5.9 Severability.
In the
event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note.
5.10 Maximum
Payments.
Nothing
contained herein shall be deemed to establish or require the payment of a rate
of interest or other charges in excess of the maximum permitted by applicable
law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess
of such maximum rate shall be credited against amounts owed by the Companies
to
the Holder and thus refunded to the Companies.
7
5.11 Security
Interest.
The
Holder has been granted a security interest (i) in certain assets of the
Companies as more fully described in the Security Agreement and (ii) pursuant
to
the Stock Pledge Agreement dated as of the date hereof.
5.12 Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.
5.13 Amendment
and Restatement.
This
Note amends and restates in its entirety (and is given in substitution for
but
not in satisfaction of) that certain $3,000,000 Secured Convertible Minimum
Borrowing Note dated as of September 7, 2005 executed by the Companies in favor
of the Holder (the “Prior
Note”).
This
Note does not effect a refinancing of all or any portion of the Obligations
heretofore evidenced by the Prior Note, it being the intention of the Companies
and the Holder to avoid effectuating a novation of such
Obligations.
8
IN
WITNESS WHEREOF,
each
Company has caused this Amended and Restated Secured Convertible Minimum
Borrowing Note to be signed in its name effective as of this 7th day of
September, 2005.
|
AMERICAN
TECHNOLOGIES GROUP, INC.
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
WITNESS:
|
NORTH
TEXAS STEEL COMPANY, INC.
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
WITNESS:
|
OMAHA
HOLDINGS CORP.
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
WITNESS:
9
EXHIBIT
A
OTHER
COMPANIES
North
Texas Steel Company, Inc., a Texas corporation
Omaha
Holdings Corp., a Delaware corporation
10
EXHIBIT
B
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert the
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Amended and Restated Secured Convertible Minimum
Borrowing Note effective as of September 7, 2005 (the “Note”)
issued
by American Technologies Group, Inc. (the “Parent”)
and
the other Companies named and as defined therein into shares of Common Stock
of
the Parent (“Shares”)
in
accordance with the terms and conditions set forth in the Note, as of the date
written below.
|
Date
of Conversion:
|
_________________________________________________ | |
|
Conversion
Price:
|
_________________________________________________ | |
|
Shares
To Be Delivered:
|
_________________________________________________ | |
|
Signature:
|
_________________________________________________ | |
|
Print
Name:
|
_________________________________________________ | |
|
Address:
|
_________________________________________________ | |
|
Holder
DWAC instructions
|
_________________________________________________ |
11