EXHIBIT 4.3
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.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
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,
Ugland
House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (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 ___,
2008 (the "Maturity Date") if not sooner
paid.
This
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
Security Agreement dated as of the date
hereof by and among the Companies and the Holder (as
amended, modified
and/or
supplemented from time to time, the
"Security Agreement").
The
following terms shall apply to this Note:
<PAGE>
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.
Subject to Section
1.2, 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. If (i) the Parent shall have
registered the shares
of the Common
Stock underlying the conversion of each
Minimum Borrowing Note, each Warrant and
each Option on a registration statement
declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii)
the market price (the "Market Price")
of the Common Stock as reported by
Bloomberg, L.P. on the
Principal Market
for
the five (5) trading days immediately
preceding a Determination Date exceeds the
then applicable Fixed Conversion
Price by at least
twenty-five
percent (25%),
the Contract Rate for the succeeding calendar month shall automatically be
reduced by 200 basis points (200 b.p.) (2%) for each
incremental
twenty-five
percent (25%) increase in the Market
Price of the Common
Stock above the then
applicable Fixed Conversion Price.
Notwithstanding
the foregoing (and
anything
to the contrary contained herein), in no event shall the Contract
Rate at any
time be less than zero percent (0%).
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
<PAGE>
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 Holder'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.
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
$0.00111. 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
<PAGE>
3.3
Mechanics of Holder'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
exerci
