WAIVER AGREEMENT

Reference is hereby made to (a) that certain Security Agreement dated as of September 7, 2005 (the “ Closing Date ”) by and among Laurus Master Fund, Ltd. (“ Laurus ”), American Technologies Group, Inc. (the “ Company ”) and the other subsidiaries of the Company named therein or which thereafter became a party thereto (the “ Security Agreement ”) and (b) the Ancillary Agreements (as defined in the Security Agreement) (the Security Agreement 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, the Company was required to file the Registration Statement (as defined in the Registration Rights Agreement) with the SEC on or prior to the Filing Date under the terms of the Registration Rights Agreement;

WHEREAS, the Company filed the Registration Statement on November 8, 2005 and therefore failed to file the Registration Statement on or prior to the Filing Date (a “ Filing Date Failure ”) and, as a result thereof, the Company was required to pay to Laurus liquidated damages as determined in accordance with Section 2 of the Registration Rights Agreement (the “ Initial Liquidated Damages ”);

WHEREAS, as of the date hereof, the Company has not paid to Laurus the Initial Liquidated Damages;

WHEREAS, the Company withdrew the Registration Statement on or about November 23, 2005 (the “ Withdrawal Date ”) and, as a result of the occurrence and continuance of such Filing Date Failure, the Company is required to pay to Laurus liquidated damages as of the Withdrawal Date through the date the Company files a Registration Statement covering the Registrable Securities with the SEC as determined in accordance with Section 2 of the Registration Rights Agreement (the “ Additional Liquidated Damages ”);

WHEREAS, as of the date hereof, the Company has not filed a Registration Statement covering the Registrable Securities with the SEC nor has the Company paid to Laurus any of the Additional Liquidated Damages that have accrued and continue to accrue since the Withdrawal Date;

WHEREAS, certain Events of Default have occurred under (a) Section 19(a) of the Security Agreement as a result of the failure by the Company and its Subsidiaries named in the Security Agreement (together with the Company, the “ Obligors ”) to make principal payments to Laurus under Term Note A for the months of June, 2006 through December, 2006 (the “ Existing Payment Default ”), (b) Section 19(c) of the Security Agreement as a result of the failure by the Company to deliver to Laurus an unaudited/internal balance sheet and statements of income, retained earnings and cash flows of each Obligor pursuant to Section 11(b) of the Security Agreement for the fiscal quarter ended October 31, 2006 (the “ Existing Financial Reporting Default ”) and (c) Section 19(c) of the Security Agreement as a result of the failure by the Company to deliver to Laurus copies of the Company’s 10-K for the fiscal year ended July 31, 2006 and the Company’s 10-Q for the fiscal quarter ended October 31, 2006 pursuant to Section 11(d) of the Security Agreement (the “ Existing SEC Filings Default ” together with the Existing Payment Default and the Existing Financial Reporting Default, collectively, the “ Existing Defaults ”); and

WHEREAS, the Obligors have requested, and Laurus has agreed, to waive on the terms and conditions set forth herein (the “ Waiver ”), (a) the obligation of the Company to pay to Laurus, as a result of the Filing Dat