WAIVER AND EXTENSION AGREEMENT
March 23, 2006
Reference is hereby made to (a) that certain Security Agreement dated as
of September 7, 2005 (the "Security Agreement") by and among Laurus Master Fund,
Ltd. ("Laurus"), American Technologies Group, Inc. (the "ATEG") and the other
subsidiaries of ATEG named therein or which thereafter became a party thereto
(such subsidiaries and ATEG, each a "Company" and collectively, the
"Companies"), (b) that certain Amended and Restated Secured Convertible Term
Note B amended and restated on January 31, 2007 and effective as of September 7,
2007 (the "Existing Note") made by the Companies in favor of Laurus in the
original principal amount of $2,000,000 and (c) the Ancillary Agreements (as
defined in the Security Agreement) (the Security Agreement, the Existing Note
and the Ancillary Agreements, as each may be amended, restated, supplemented and
modified from time to time, the "Agreements"). Capitalized terms used but not
defined herein shall have the meanings given them in the Security Agreement.
WHEREAS, ATEG filed a Registration Statement (as defined in the
Registration Rights Agreement) covering the Registrable Securities with the SEC
on January 31, 2007;
WHEREAS, the Registration Statement is required to be declared effective
by the SEC no later than April 16, 2007 (the "Effectiveness Date");
WHEREAS, an Event of Default has occurred under Section 19(a) of the
Security Agreement (the "Existing Default") as a result of the failure by the
Companies to pay in full all amounts owing under the Existing Note on the
Maturity Date (as defined in the Existing Note); and
WHEREAS, the Companies have requested that Laurus (a) extend the
Effectiveness Date, (b) waive the Existing Default and (c) extend the Maturity
Date of the Existing Note, and Laurus has agreed to do so on the terms and
conditions set forth in this Waiver and Extension Agreement (this "Agreement").
NOW, THEREFORE, in consideration of the above, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Subject to Section 3 hereof, Laurus hereby extends the Effectiveness
Date from April 16, 2007 to May 7, 2007. ATEG hereby agrees that it shall cause
the Registration Statement to be declared effective under the Securities Act on
or prior to May 7, 2007. Each Company hereby acknowledges that the breach of
this covenant shall constitute an automatic Event of Default and no cure or
grace period shall be applicable thereto notwithstanding any other provision of
the Agreements to the contrary
2. Subject to Section 3 hereof, Laurus hereby waives the Existing Default
and agrees to extend the date upon which all amounts due under the Existing Note
are payable from March 6, 2007 to May 7, 2007 pursuant to and in accordance with
that certain Amended and Restated Secured Convertible Term Note B amended and
restated on March 23, 2007 and effective as of September 7, 2007 (the "A&R
Note") made by the Companies in favor of Laurus in the original principal amount
of $2,000,000. Each Company hereby acknowledges, ratifies and confirms that the
Companies shall, jointly and severally, make interest payments to Laurus in
accordance with the terms of the A&R Note and a principal payment to Laurus in
an amount equal to the unpaid principal balance of the A&R Note on the Maturity
Date (as defined in the A&R Note), together with any accrued and unpaid interest
thereon.
3. (a) The Companies hereby agree, jointly and severally, to pay to Laurus
a waiver and amendment fee in the amount of Three Hundred Thousand Dollars
($300,000) (the "Fee") which shall be fully earned on the date of this Agreement
and shall be paid in full on the Maturity Date (as defined in the A&R Note). The
Fee shall be added to and become a part of the Obligations secured by the
Collateral.
(b) The parties hereto agree that the fair market value of the Fee
received in consideration of the amendments to the Existing Note made by Laurus
hereunder is hereby designated as interest and, accordingly, shall be treated as
a reduction of the remaining stated principal amount (which reduced principal
amount shall be treated as the issue price) of the A&R Note for U.S. federal
income tax purposes under and pursuant to Treasury Regulation Sections
1.1001-3(e)(2)(iii), 1.1273-2(g)(2)(ii) and 1.1274-2(b)(1). The parties further
agree to file all applicable tax returns in accordance with such
characterization and shall not take a position on any tax return or in any
judicial or administrative proceeding that is inconsistent with such
characterization. Notwithstanding the foregoing, nothing contained in this
paragraph shall or shall be deemed to modify or impair in any manner whatsoever
the Obligations from time to time owing to Laurus under any of the Agreements.
4. The Agreement shall be effective upon (a) the execution by each Company
and Laurus of this Agreement and the receipt by Laurus of each Company's duly
executed counterpart to this Agreement and (b) receipt by Laurus of the A&R Note
duly executed by each Company.
5. Each Company hereby represents and warrants to Laurus that, on the date
hereof, after giving effect to this Agreement, (a) no Event of Default exists,
(b) all representations, warranties and covenants made by such Company in
connection with the Agreements are true, correct and complete and (c) all of
such Company's covenant requirements under the Agreements have been met.
6. Except as expressly described herein, this Agreement shall not
constitute (a) a modification or an alteration of any of the terms, conditions
or covenants of the Agreements, all of which remain in full force and effect, or
(b) a waiver, release or limitation upon Laurus' exercise of any of its rights
and remedies thereunder, all of which are hereby expressly reserved. This
Agreement shall not relieve or release any Company in any way from any of its
duties, obligations, covenants or agreements under the Agreements or from the
consequences of any Events of Default thereunder, except as expressly described
above.
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7. This Agreement shall be governed by and construed under the laws of the
State of New York as applied to agreements among New York residents entered into
and to be performed entirely within New York. Provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors,
and administrators of the parties hereto. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Extension Agreement to be signed by their respective representatives thereunto
duly authorized, all as of the date first written above.
COMPANIES:
AMERICAN TECHNOLOGIES GROUP, INC.
/s/ Xx. Xxxx Xxxxx, CFO & Chairman
NORTH TEXAS STEEL COMPANY, INC.
/s/ R. Xxxxx Xxxxx, President
OMAHA HOLDINGS CORP.
/s/ Xxxxxxx X. Xxxxxx, Director
LAURUS:
LAURUS MASTER FUND, LTD.
/s/ Xxxxx Grin, Director
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