<PAGE>
As filed with the Securities and Exchange Commission on August 24, 1999
Registration No. 333-68327
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 5 to
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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AMERICAN TECHNOLOGIES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 95-4307525
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
JOHN M. DAB, ESQ.
General Counsel
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
Telecopy: (626) 357-4464
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] If delivery of the prospectus is expected
to be made pursuant to Rule 434 please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Amount to be Price per Offering Registration
Title of Securities to be Registered Registered Share (1) Price (1) Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value (2) 2,500,000 shares $0.65 $ 1,625,000 $ 451.75 (4)
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Common Stock, $0.001 par value (2) 4,616,000 shares $0.36 $ 1,661,760 $ 461.97 (5)
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Common Stock, $0.001 par value (2) 440,000 shares $0.58 $ 255,200 $ 70.95 (4)
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Common Stock, $0.001 par value 700,000 shares $0.51 $ 357,000 $ 99.25 (4)
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Common Stock, $0.001 par value (3) 527,500 shares $0.75 $ 395,625 $ 109.99 (4)
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Common Stock, $0.001 par value (2) 620,000 shares $0.50 $ 310,000 $ 86.18 (4)
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Total 9,403,500 shares $ 4,604,585 $ 1,280.09 (6)
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c).
(2) Includes shares of Common Stock owned by certain stock holders and
shares issuable upon the conversion of various convertible debentures. This is
not intended to constitute a prediction as to the number of shares of Common
Stock into which the Debentures will be converted. In addition to the shares set
forth in the table, pursuant to Rule 416 under the Securities Act of 1933, as
amended, this Registration Statement also covers an indeterminate number of
additional shares of Common Stock as may become issuable as a result of stock
splits, stock dividends and anti-dilution provisions.
(3) Issuable upon exercise of warrants evidencing the right to purchase
shares of Common Stock.
(4) This amount was previously paid.
(5) $250.20 of this amount was paid with the previous filings of this
Registration Statement. An additional fee of $211.77 is paid herewith to
cover an additioanl 2,116,000 shares of Common Stock.
(6) $1,068.32 of this amount was paid with the previous filings of this
Registration Statement. An additional fee of $211.77 is paid herewith to
cover an additional 2,116,000 shares of Common Stock.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
9,403,500 SHARES OF COMMON STOCK
AMERICAN TECHNOLOGIES GROUP INC.
The 9,403,500 shares of common stock being offered by this prospectus
are being offered by certain selling securityholders. See "Selling
Securityholders" on page 17.
The selling securityholders may offer these shares from time to time in
transactions on the OTC Bulletin Board or in privately negotiated transactions
as described under the "Plan of Distribution" on page 22. We will not receive
any of the proceeds.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"ATEG." On August 19, 1999, the closing sale price of the common stock on the
OTC Bulletin Board was $0.29.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 10.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August 24, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT AMERICAN TECHNOLOGIES .......................................................................... 4
Business Summary ................................................................................ 4
Current Financing ............................................................................... 6
Recent Financing ................................................................................ 8
Proposed Merger with Commodore Separation Technologies Inc ...................................... 9
Resignation of Chief Operating Officer/
Chief Financial Officer ..................................................................... 9
RISK FACTORS ......................................................................................... 10
Financial Risk Factors ............................................................................... 10
We have a History of Financial Losses Which Will Continue Through
the End of the Current Fiscal Year .......................................................... 10
We have Experienced Substantial Difficulty Generating Sufficient Working
Capital ..................................................................................... 10
Our Sales of Securities Convertible into Common Stock at a Discount to the Market Price
May Cause the Market Value of Our Common Stock to Drop ...................................... 11
Lack of Listing on a Major Exchange May Make It Difficult for Investors to Dispose of
Our Common Stock ............................................................................ 11
We May become a Penny Stock Resulting in Reduced Willingness of Broker-Dealers to Trade Our
Common Stock ................................................................................ 12
Business Risk Factors ................................................................................ 12
We May Not Find Customers for Our Products ...................................................... 12
The Scientific Community May Not Provide Sufficient
Validation of Our Products to Encourage Sales ............................................... 13
There May Be Unforeseen Regulatory Requirements which
Impede the Marketing and Sale of Our Products ............................................... 13
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<CAPTION>
We May Not Be Able to Obtain the Patents or Trademarks
Needed to Protect the Value of Our Technologies ............................................. 14
WHERE YOU CAN FIND MORE INFORMATION .................................................................. 15
FORWARD-LOOKING STATEMENTS ........................................................................... 16
USE OF PROCEEDS FROM SALE OF COMMON STOCK ............................................................ 16
USE OF PROCEEDS FROM SALE OF DEBENTURES .............................................................. 17
USE OF PROCEEDS FROM EXERCISE OF WARRANTS ............................................................ 17
SELLING SECURITYHOLDERS .............................................................................. 17
PLAN OF DISTRIBUTION ................................................................................. 22
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ....................................................... 23
EXPERTS .............................................................................................. 23
LEGAL MATTERS ........................................................................................ 23
</TABLE>
3
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ABOUT AMERICAN TECHNOLOGIES
Business Summary
American Technologies develops and sells products based upon on our
patented and proprietary technologies. The goal of our efforts is to develop
products that have a positive impact on the environment. Our address and
telephone number are: 1017 South Mountain Avenue, Monrovia, California 91016,
(626) 357-5000.
We concentrate on technology discovery and development efforts in three
areas:
- IE-TM- Technology
- Water Purification
- Particle Beams
Our IE Technology refers to a proprietary process which produces water
solutions containing water clusters that are stable at room temperature. The
clusters are groups of water molecules configured in such a way so as to produce
relatively large plus/minus polarity. We believe this polarity is what gives the
clusters their catalytic properties. We can produce different kinds of water
solutions for different applications.
Tests indicate that these water clusters improve the performance of
various chemical, physical and biological processes, including combustion
enhancement, descaling, enzyme processes and de-coking. For example, in internal
combustion engines the clusters attract hydrocarbons and oxygen resulting in a
more complete burning of the fuel. This results in improved efficiency and
reduced carbon deposits in the combustion chamber.
In certain biological applications related to enzyme production, the
clusters have been shown to significantly improve enzyme yield or rate of enzyme
production. In one instance enzyme cultures utilizing IE Technology water
solutions required 97 fewer hours to achieve the same growth level as comparable
cultures utilizing distilled water. Not all tests have achieved such results.
Substantial additional testing remains to be conducted to determine the effects
of IE Technology on different enzymes and if the use of IE Technology in enzyme
production on a commercial scale is viable. The increased
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enzyme production rate that may be achieved utilizing IE Technology water
solutions may result in cost savings to the enzyme production industry.
Independent researchers observe these water clusters by different
standard research tools including:
- Laser autocorrelation
- Electron microscope
- Atomic force microscope
- UV spectroscopy
American Technologies sells these water solutions for use in several
product lines including household cleaning products. We also use them in our
combustion enhancers.
During the fiscal year ended July 31, 1998, revenue from the sale of
these water solutions for use in products manufactured by others was
approximately $117,000 and revenue from the sale of The Force-Registered
Trademark- combustion enhancer was $591,000. During the same period, American
Technologies had incurred net losses of approximately $9.64 million.
Kinetics Technology International Corporation has conducted field tests
on the use of IE Technology as a coke formation suppresser. Kinetics Technology
has funded the testing and, if the testing is successful, will have financial
responsibility for commercialization of the final product. The initial test
program implemented by Kinetics Technology had favorable results. Kinetics
Technology is now developing a marketing strategy for the use of our IE
Technology in various coking applications.
In the water purification area, our low pressure vacuum distillation
system is undergoing tooling design for a home use version for introduction to
the marketplace in late 1999. Our vacuum distiller utilizes a proprietary method
to provide the advantages of vacuum distillers without the need for expensive
and noisy vacuum pumps.
Under our agreement with Sunpentown, Ltd. for the tooling design and
manufacturing of the distiller, they are responsible for all design costs and
the cost of producing the tooling. Our marketing plan for the distiller involves
establishing relationships with distributors experienced in this type of
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product. We do not anticipate incurring significant marketing costs for this
product.
The third technology is the particle beam project which produces a beam
of heavy particles. As a beam of particles, it functions in much the same way as
the common laser. The important difference is that it is composed of heavy
particles rather than light.
The development of the particle beam has been conducted through an
American Technologies sponsored research program with the California Institute
of Technology. The development of this technology is likely to require a minimum
of three to five years and expenditure of substantial sums of money, likely to
be in excess of $10,000,000, on research and development. We submitted a
proposal to the Department of Energy for a $5,000,000 joint venture grant to
produce a small pilot plant based on the current prototype located at CalTech.
The proposal describes the potential of our particle beam to turn harmful
nuclear waste into harmless components. The DOE has reviewed the proposal and
discussions are underway regarding funding of the project. The particle beam
project has been on hold pending receipt of significant funding to continue its
development
Dr. Lo, our Director of Research and Development, has developed certain
particle beam theories. According to these theories, the proposed particle beam
may be able to break down molecules or even atoms and their nuclei, or be used
for rock drilling, medical surgery or precision cutting of metals without
distortion or excessive heat. No evidence exists to substantiate these potential
applications.
Current Financing
Gaines P. Campbell, Jr., who has purchased an aggregate of $1,700,000
of convertible debentures in the past 8 months, has agreed to purchase an
additional $500,000 principal amount of Secured Convertible Debenture upon the
effective date of this registration statement. The debentures purchased by Mr.
Campbell have various terms as set forth on the following table.
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<TABLE>
<CAPTION>
Principal Amount Interest Conversion Redemption
of Debenture Rate Rate Right
------------ ---- ---- -----
<S> <C> <C> <C>
$250,000 3% $0.58 None
$300,000 3% $0.50 None
$150,000 3% $0.50 None
$1,000,000 8.5% $0.30 as to As to $400,000, at
$600,000; the Company's option
$0.25 as to prior to 12/31/99 at
$400,000, if 135% of principal
not redeemed amount; if redeemed
on such date,
effective annual
interest rate of
approximately 70%
$500,000 Prime +1/2% $0.25 At Company's option
upon the prior to 12/31/99 at
date hereof 135% of principal
amount; if redeemed
on such date,
effective annual
interest rate of
approximately 90%
</TABLE>
In July, 1999 we entered into an Underwriting Agreement with First
Liberty Securities, Ltd. for the firm commitment underwriting of 1,000,000 units
at $4.00 per unit with each unit consisting of one Class A Convertible Revenue
Sharing Bond and 1 warrant to purchase a share of common stock at $10.00. The
bonds mature on the earlier of receipt of $20.00 in disbursements or December
31, 2009. Revenue disbursement are to be paid to the bond holders at the rate of
2.5% of our gross sales revenue. At maturity, the bonds are redeemable at our
option for $4.00 per bond or 1 share of common stock for 5 bonds. During the
first year after issuance, each bond is also convertible into common stock on a
0.80 for 1 basis or four bonds for 5 shares of common stock. However, once the
bond holders have received $4.00 in revenue disbursements per bond, the bonds
are no longer convertible. Sale of the units are anticipated to be made outside
of the United States under Regulation S and to start in September, 1999.
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On April 12, 1999, we received a letter of intent for a firm commitment
offering of $10,000,000 of American Technologies' preferred stock to be
underwritten by Security Capital Trading Inc. The preferred stock will be
offered at $10.00 per share and carry a $10.00 per share liquidation preference.
The preferred stock will be convertible into common stock at between
approximately 120% to 130% of the closing bid price of the common stock
immediately prior to sale of the preferred stock. In addition, holders of the
preferred stock will receive a cumulative cash dividend at the rate of 10% per
annum, payable semi-annually.
The preferred stock will be purchased by Security Capital at a 10%
discount to the public offering price. Security Capital will receive a
non-accountable expense allowance equal to 3% of the gross proceeds of the
offering plus five year warrants to purchase that number of shares of preferred
stock equal to 10% of the number of shares of preferred stock sold in the
offering. The exercise price of the warrants is 120% of the offering price of
the preferred stock. The appropriate integration of this financing opportunity
with the financing through First Liberty Securities has not yet been evaluated
by management or the Board of Directors.
Recent Financing
From October, 1998, through July, 1999, we sold to 8 investors
$2,750,000 principal amount of debentures in a private placement. In connection
with the sale of $1,050,000 principal amount of the debentures we are obligated
to register with the SEC on Form S-3 within 90 days the shares of common stock
issuable on conversion of the debentures and exercise of the warrants issued
with the debentures. The holders of $875,000 in principal amount of debentures
are not eligible to have their shares of common stock included in a registration
statement on Form S-3. If the registration statement is not declared effective
by the SEC within this 90 day period, we must pay liquidated damages to certain
of the investors. For the first 30 days we are late the damages are 2% of the
principal amount invested. Starting 120 days after the purchase of the
debentures the damages are 3% per month. Through August 16, 1999, we have
incurred approximately $164,550 in liquidated damages.
8
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Proposed Merger with Commodore Separation Technologies Inc.
In February, 1999, we signed a letter of intent which effectuates our
acquisition of Commodore Separation Technologies, although the transaction is
structured as a merger. Commodore Separation Technologies is commercializing a
proprietary separation technology and recovery system known as SLiM-TM-. SLiM
stands for Supported Liquid Membrane. SLiM can selectively remove from water
valuable substances for reuse or toxic materials for safe disposal.
Negotiations on the terms of the definitive acquisition agreement have
been temporarily deferred while we attempted to secure operating capital on
acceptable terms. As a result of the delay in finalizing the definitive
agreement, there can be no absolute assurance that a final agreement can be
reached with Commodore Separation Technologies along terms previously
negotiated. Under the most recent draft of the agreement, Commodore Separation
Technologies will merge into a newly formed subsidiary of American Technologies.
Our existing shareholders will retain ownership of approximately 80.1 percent of
American Technologies and the shareholders of Commodore Separation Technologies
will own approximately 19.9 percent of American Technologies. American
Technologies will own 100% of the common stock of the new subsidiary and the
Commodore Separation Technologies shareholders will own preferred stock of the
subsidiary entitling them to receive 38% of the net profits, after taxes, of the
existing business of Commodore Separation Technologies.
One of the conditions to the completion of the transaction is our
receipt of $10 million from the sale of securities. See "Current Financing"
above for additional information on American Technologies' current financing
activities.
Resignation of Chief Operating Officer/Chief Financial Officer
Harold Rapp, who has served as our Chief Operating Officer and Chief
Financial officer since 1997 has resigned to pursue other opportunities. Yan
Lin, our controller, has been appointed as Acting Chief Financial Officer while
a search is made for a permanent Chief Financial Officer. We will not appoint a
new Chief Operating Officer and the duties of that position will be shared by
the existing executives.
9
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are the only
material risks facing us of which we are currently aware. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.
Financial Risk Factors
WE HAVE A HISTORY OF FINANCIAL LOSSES WHICH WILL CONTINUE THROUGH THE END OF THE
CURRENT FISCAL YEAR
We have operated at a loss throughout our history. Net losses for the
nine months ended April 30, 1999 were approximately 6.22 million and for the
fiscal year ended July 31, 1998 were approximately $9.44 million. Net losses for
the fiscal year ended July 31, 1997 were approximately $9.64 million. At July
31, 1998 we had an accumulated deficit of $36.56 million.
We anticipate that with the disposal of our publishing and mining
operations and other expense reductions that our cash to be used in operating
activities will be less for the year ending July 31, 1999 compared to the prior
year. However, the amount of net losses and the time required to reach
profitability are uncertain. There can be no assurance that we will ever be able
to generate sufficient revenue from our products now ready for market or from
those under development to achieve profitability on a sustained basis. See the
Management's Discussion and Analysis section of Amendment No. 2 to our Form
10-KSB/A.
WE HAVE EXPERIENCED SUBSTANTIAL DIFFICULTY GENERATING SUFFICIENT WORKING CAPITAL
American Technologies has been experiencing difficulty in maintaining
sufficient working capital needed to insure stability and continued existence.
Only a small portion of the capital expended to date has come from actual
revenue generation, and we find it increasingly difficult to raise
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investment capital. We are at a critical juncture in our history. It is
absolutely essential to begin to generate significant revenues in order to
maintain our existence. While plans are in place and being executed directed
at accomplishing this end, there can be no guarantee that these plans will
prove to be successful.
Our current cash monthly operating expenses are approximately $250,000.
We believe our current cash reserves plus the $500,000 due upon the
effectiveness of the registration statement of which this prospectus forms a
part, along with anticipated minimum projected revenues of $2,000,000 for fiscal
2000, will be sufficient for the Company to operate in the normal course for the
next 12 months. However, if revenues are less than projected, the Company's
ability to continue operations will be dependent upon additional financing
activities including the sale of the Revenue Bonds by First Liberty, of which
there can be no assurance.
Our auditors' report on our financial statements for the fiscal year
ending July 31, 1998 contains an explanatory paragraph indicating that there
were operating losses which raised substantial doubt about the ability of
American Technologies to continue as a going concern. This going concern
qualification may adversely affect our perception by prospective customers and
suppliers.
OUR SALES OF SECURITIES CONVERTIBLE INTO COMMON STOCK AT A DISCOUNT TO THE
MARKET PRICE MAY CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DROP
As a result of our poor financial condition, several times over the
past few years we have sold securities that are convertible into our common
stock at a discount to the market price for the common stock. This has resulted
in the issuance of a significant amount of additional shares of common stock at
prices below market. It is possible that this method of financing operations has
contributed to the decline in the market price of the common stock. If we need
to obtain financing in the future in the same manner, this may again have an
adverse affect on the market price for our common stock.
LACK OF LISTING ON A MAJOR EXCHANGE MAY MAKE IT DIFFICULT FOR INVESTORS TO
DISPOSE OF OUR COMMON STOCK
Our common stock is quoted on the OTC Bulletin Board system. The OTC
Bulletin Board generally supports quotations
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for companies that do not meet the NASDAQ SmallCap Market listing
requirements. As a result, investors may find it more difficult to dispose of
or to obtain accurate price quotations of our common stock than they would if
the stock were quoted on the SmallCap Market. In addition, quotation on the
bulletin board depends on the willingness of broker-dealers to make a market
in our common stock. There can be no assurance that the stock will continue
to be quoted on the bulletin board or that there will continue to be a market
for the buying and selling of our common stock.
There are currently 15 firms making a market in our common stock. The
firms are:
M. H. Meyerson & Co., Inc. Knight Securities, L.P.
Wm. V. Frankel & Co., Incorporated Sharpe Capital, Inc.
Speer, Leeds & Kellogg Capital Markets Olsen Payne & Company
Hill Thompson Magid & Co. Inc. Wien Securities Corp.
Herzog, Heine, Geduld, Inc. Wilson-Davis & Co., Inc.
First Level Capital Inc. Mayer & Schweitzer, Inc.
North American Institutional Brokers GVR Company
USCC Trading, a Division of Fleet Securities
WE MAY BECOME A PENNY STOCK RESULTING IN REDUCED WILLINGNESS OF BROKER-DEALERS
TO TRADE OUR COMMON STOCK
If our net tangible assets fall below $2 million at July 31, 1999 or if
we otherwise fail to meet certain criteria of the Commission, the common stock
becomes subject to so-called "penny stock" rules that impose additional sales
practice and market making requirements on broker-dealers who sell and/or make a
market in such securities. These rules may discourage the ability or willingness
of broker-dealers to sell and/or make a market in our common stock.
Business Risk Factors
As American Technologies is engaged in the development and marketing of
products based on new technologies, there are significant risks associated with
its potential success.
WE MAY NOT FIND CUSTOMERS FOR OUR PRODUCTS
None of our current products enjoy widespread distribution or customer
acceptance. While we do have a number of products that are past the development
stage, we have yet to establish
12
<PAGE>
major, stable markets for them. Although we believe we have the expertise to
commercialize these products, any or all of our products may fail to prove to
have widespread customer appeal. Various marketing strategies and alliances
are now in place. Current significant distributors include Hungarofek and
Market One. Kinetics Technology is developing a marketing strategy for the
use of our IE Technology in various coking applications.
THE SCIENTIFIC COMMUNITY MAY NOT PROVIDE SUFFICIENT VALIDATION OF OUR PRODUCTS
TO ENCOURAGE SALES
Our technologies have not received broad acceptance by the general
scientific community. To a great extent, scientific validation of our
technologies is essential to acceptance of the products by the marketplace.
Historically, the scientific community has been resistant to new ideas and
technologies, and, although we believe that we have been successful in
establishing working relationships with many scientists at prestigious academic
institutions, there is no guarantee that this will lead to acceptance of our
technologies by the scientific community as a whole. Failure to achieve such
acceptance could be materially detrimental to our efforts to establish markets
for our products.
THERE MAY BE UNFORESEEN REGULATORY REQUIREMENTS WHICH IMPEDE THE MARKETING AND
SALE OF OUR PRODUCTS
Most of our current products are being sold directly to the consumer in
markets that are not generally regulated by government agencies. In the case of
consumer products for enhancing engine performance, such as The Force or the
F420 fuel additive, registration of these products with CARB (California Air
Resources Board) and EPA (Environmental Protection Agency) is required and has
been done.
Since the F420 additive's chemical contents fall within the
restrictions of the EPA regulations, there are no known impediments to
maintaining this registration. We have also registered The Force airborne
combustion enhancer as an add-on device with CARB. There is no known reason why
CARB would withdraw that registration.
In the case of bulk fuel additives, there are strong industry
regulations. Extensive testing is required to meet these industry regulations
prior to sale of the additive and there is no guarantee that our bulk additive
products can meet all of these industry regulations.
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<PAGE>
WE MAY NOT BE ABLE TO OBTAIN THE PATENTS OR TRADEMARKS NEEDED TO PROTECT THE
VALUE OF OUR TECHNOLOGIES
Our success will depend, in part, on whether we can obtain patent and
trademark protection for our technologies and products. We cannot guarantee that
we will be able to secure these protections. If we fail to do so, there is no
guarantee that our technologies will not be subject to copying by other
entities. This would result in a level of competition which could well prevent
us from being successful. Although we have taken steps, including entering into
confidentiality agreements with our employees and third parties to protect our
trade secrets and unpatented know-how, other third parties may still be able to
obtain such information.
We have applied for a number of patents on our particle beam, vacuum
distiller and IE technologies. Some have been approved. The status is as
follows:
- Particle Beam Approved Patents
We are maintaining 7 granted U.S. patents and 9 foreign patents issued
on particle beam technology. Additionally, there are 3 U.S. and 6
foreign patent applications pending.
- IE Technology
We have been granted 1 U.S. patent on the IE Technology and 7 U.S.
patent applications are in various stages of prosecution. Foreign
patent applications to protect this technology are also in progress.
- Vacuum Distiller
There are 3 U.S. patent applications pending on the vacuum distiller
technology. Foreign applications to protect the technology are also in
process. No patents have been granted yet.
All of our products currently offered for sale are protected by patents
in the U.S. The group of patent applications currently in process have
sufficient overlap to offer protection to our current commercial applications.
We file applications with the U.S. Patent and Trademark Office once we perceive
a new significant commercial application, and prior to public disclosure of the
technology.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at www.ateg.com or at the SEC's web site at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling securityholders sell all the shares. This
prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-6827).
The following documents are hereby incorporated by reference in this
Registration Statement:
- - Annual Report on Form 10-KSB for the year ended July 31, 1998.
- - Amendment Number 1 to our Annual Report on Form 10-KSB/A for the year ended
July 31, 1998.
- - Amendment Number 2 to our Annual Report on Form 10-KSB/A for the year ended
July 31, 1998.
- - Amendment Number 3 to our Annual Report on Form 10-KSB/A for the year ended
July 31, 1998.
- - Amendment Number 4 to our Annual Report on Form 10-KSB/A for the year ended
July 31, 1998.
- - Quarterly Report on Form 10-QSB for the three months ended October 31, 1998.
- - Amendment Number 1 to our Quarterly Report on Form 10-QSB/A for the three
months ended October 31, 1998.
- - Quarterly Report on Form 10-QSB for the three months ended January 31, 1999.
- - Quarterly Report on Form 10-QSB for the three months ended April 30, 1999.
15
<PAGE>
- - Amendment Number 1 to our Quarterly Report on Form 10-QSB/A for the three
months ended April 30, 1999.
- - Current Report of Form 8-K dated January 5, 1999.
- - The section of our Registration Statement on Form 10, filed on January 24,
1994, entitled "Description of Securities," as amended by Amendment Nos. 1,
2, 3 and 4.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Corporate Secretary
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. The selling securityholders will not make an
offer of these shares in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of such documents.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in the
documents that are incorporated by reference. Forward-looking statements are
subject to risks and uncertainties and include information concerning possible
or assumed future results of our operations. When we use words such as
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. You should note that an investment in our securities
involves certain risks and uncertainties that could affect our future financial
results. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
set forth in "Risk Factors" and elsewhere in this prospectus.
USE OF PROCEEDS FROM SALE OF COMMON STOCK
American Technologies will not receive any of the proceeds from the
sale of the shares of common stock by the selling securityholders.
16
<PAGE>
USE OF PROCEEDS FROM SALE OF DEBENTURES
We have received $2,750,000 from the sale of the debentures sold since
October, 1998.
We have used and will continue to use the net proceeds from the sale of
the debentures for working capital and the payment of existing liabilities.
USE OF PROCEEDS FROM EXERCISE OF WARRANTS
If all of the warrants for which the underlying shares of common stock
are included in this prospectus are exercised, we will receive $376,875. We
intend to use these funds for working capital and the payment of existing
liabilities.
SELLING SECURITYHOLDERS
Selling Securityholders
The following table identifies certain selling security-holders along
with the principal amount of debentures and the number of warrants they own.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF NUMBER OF
NAME DEBENTURES WARRANTS
---- ---------- --------
<S> <C> <C>
Britannia Associates Limited $ 375,000 37,500
JRT Holdings $ 25,000 2,500
Target Growth Fund Ltd. $ 250,000 25,000
Intermediazioni $ 50,000 5,000
Internazionali S.A.
Spiga Limited $ 100,000 62,500
Gaines P. Campbell, Jr. $1,550,000 355,000
James Hennen $ 75,000 7,500
Michael David Fort $ 75,000 7,500
</TABLE>
17
<PAGE>
In addition to the above selling debenture holders, the following
stockholders are offering the number of shares adjacent to their names:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
MacCaughern Trade Development 500,000
Boru Enterprises 200,000
William R. Rogers, Jr. 600,000
George Garcy 50,000
Comtrad Industries, Inc. 489,738
National Financial Communications Corp. 100,000
Steve Illes 500,000
</TABLE>
Conversion of Debentures
The above identified selling debenture holders may convert or exchange
their debentures for shares of our common stock by giving written notice to us.
$800,000 of the debentures are convertible at a variable conversion price
depending upon the market price for our common stock on the date of conversion.
There is a maximum conversion price of $0.62 but no minimum conversion price.
$250,000 of debentures have a fixed conversion price of $0.58, $450,000 of
debentures have a fixed conversion price of $0.50, $600,000 of debentures have a
fixed conversion price of $0.30 and $400,000 of debentures have a fixed
conversion price of $0.25.
Variable Conversion Price
The variable conversion price is the lesser of
- $0.62; or
- 75% of the average closing bid price for the common stock during the
five trading days ending one day prior to conversion of the
debenture.
Estimate of Shares Issuable Upon Conversion
If the $800,000 principal amount of debentures with the variable
conversion price were converted on August 17, 1999, the
18
<PAGE>
variable conversion price would be approximately $0.22 and the total number
of shares of common stock issued would be 3,636,364. This does not include any
shares of common stock issued as interest due on the debentures. $800,000 in
principal amount of the debentures bear interest at 6% per annum, $700,000 in
principal amount of the debentures bear interest at 3% per annum and
$1,000,000 in principal amount of the debentures bear interest at 8.5%.
The following table contains the names of the selling securityholders,
the number of shares of common stock owned beneficially by each of the selling
securityholders as of August 17, 1999, and the number of shares which may be
offered for resale under this prospectus. For the purpose of stating the number
of shares of common stock beneficially owned by the selling securityholders in
the following table, the number of shares of common stock calculated to be
issuable in connection with the conversion of the debentures assumes the
debentures were converted on August 17, 1999. This calculation results in an
estimate of the number of shares of common stock issuable upon conversion of the
debentures.
The information included in the following table is based upon
information provided by the selling securityholders. Because the selling
securityholders may offer all, some or none of their common stock, no definitive
estimate as to the number of shares that will be held by the selling
securityholders after the offering can be provided and the following table has
been prepared on the assumption that all shares of common stock offered under
this prospectus will be sold.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY SHARES OF BENEFICIALLY
NAME AND OWNED PRIOR TO COMMON STOCK OWNED AFTER
ADDRESS OFFERING (1)(2) BEING OFFERED OFFERING (3)
------- --------------- ------------- ------------
<S> <C> <C> <C>
Britannia Associates 1,742,046 1,742,046 0
Third Floor, Omar Hodge Bldg.
Wickhams Cay, #2
Road Town, Tortola, BVI
JRT Holdings 116,136 116,136 0
c/o Astor Capital
9300 Wilshire Blvd., Suite 308
Beverly Hills, CA 90212
Target Growth Fund Ltd. 1,161,364 1,161,364 0
c/o Bermuda Commercial Bank Bldg.
44 Church Street
Hamilton HM12 Bermuda
Intermediazioni 232,273 232,273 0
Internazionali S.A.
Pasea Estate, Road Town
Tortola BVI
</TABLE>
- ------------------------
Footnotes on page 21.
19
<PAGE>
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY SHARES OF BENEFICIALLY
NAME AND OWNED PRIOR TO COMMON STOCK OWNED AFTER
ADDRESS OFFERING (1)(2) BEING OFFERED OFFERING (3)
------- --------------- ------------- ------------
<S> <C> <C> <C>
Spiga Ltd. 460,796 460,796 0
Skelton Building
Road Town, Tortola BVI
Gaines P. Campbell, Jr. 3,061,034 3,031,034 25,000
1341 Birmingham Highway
Chattanooga, TN 37419
MacCaughern Trade Development 500,000 500,000 0
5263 Heather Lane
Park City, Utah 84098
Boru Enterprises 300,000 200,000 100,000
62 S.E. 6th Avenue
Delray Beach, FL 33483
James Hennen 158,500 158,500 1,000
2 Woodhill
Lookout Mountain, TN 37350
Michael David Fort 157,500 157,500 0
Route #1, Box 792
Twisp, Washington 98856
William R. Rogers, Jr. 655,000 600,000 55,000
140 Broadway 46th Floor
New York, New York 10005
George Garcy 50,000 50,000 0
9025 Wilshire Blvd.
Penthouse 500
Beverly Hills, CA 90211
Steve Illes 540,000 500,000 400,000
28122 San Lucas
Mission Viejo, CA 92692
Comtrad Industries, Inc. 489,738 489,738 0
2820 Waterford Lake Drive
Midlothian, Virginia 23112
National Financial 100,000 100,000 0
Communications Corp.
1040 Great Plain Avenue
NEEDHAM, MASSACHUSETTS 02492
Footnotes on next page.
</TABLE>
20
<PAGE>
Footnotes from preceding pages.
(1) Each of the parties listed has sole voting and investment power for all of
the shares of common stock indicated.
(2) As required by the regulations of the SEC, the number of shares shown as
beneficially owned includes shares which can be purchased within 60 days after
August 17, 1999. The actual number of shares shown is subject to adjustment and
could be materially less or more than the estimated amount indicated depending
upon factors which we cannot predict such as the market price of the common
stock on the actual date of conversion of the debentures.
(3) Assumes the sale of all shares offered.
Registration Rights
The subscription agreements for the sale of the debentures held by the
selling shareholders require us to register with the SEC the public offering of
the shares of common stock issuable on conversion of the debentures and exercise
of the warrants. We are also obligated to register and qualify the shares under
such state securities laws as the selling securityholders may request.
We are obligated to use our best efforts to cause the registration
statement to become effective and to keep the registration statement effective
for two years or until the selling securityholders may sell all registerable
securities under Rule 144 or until the debenture holders no longer own any
shares, whichever occurs first.
The subscription agreements for $800,000 principal amount of
debentures provide for liquidated damages to the debenture holders if we are
unable to have the registration statement declared effective by the SEC
within 90 days from the date of sale of the debentures. The amount due in
liquidated damages is approximately $164,550 payable in cash or common stock
valued at the lower of current market value or $0.62.
In connection with our private placement of $2,750,000 principal amount
of debentures, we issued warrants to purchase 475,000 shares of Common Stock to
the debenture holders and warrants to purchase 52,500 shares of common stock to
Spiga Ltd., our selling agent, at $0.75, all for a period of 5 years. Spiga also
purchased $100,000 principal amount of debentures. Only warrants to purchase
502,500 shares of common stock are included in this prospectus.
21
<PAGE>
PLAN OF DISTRIBUTION
The selling securityholders may offer the shares of common stock
received upon conversion of the debentures or exercise of the warrants at
various times in transactions:
- in the over-the-counter market;
- on any exchange where our common stock is then listed;
- with broker-dealers or third parties other than in the
over-the-counter market or on an exchange, including block sales; or
- involving a combination of such methods or other methods.
The selling securityholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, at fixed prices or at a combination of such
prices.
The selling securityholders may use dealers, agents or underwriters to
sell their shares. If this happens, the dealers, agents or underwriters may
receive compensation in the form of discounts or commissions from the selling
securityholders or from the purchasers of shares or from both. The compensation
to a particular broker may be in excess of customary compensation.
The selling securityholders and any dealers, agents or underwriters
that participate with the selling securityholders in the distribution of the
shares may be deemed to be "underwriters" as this term is defined in the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on the resale of the shares of our
common stock offered by this prospectus, may be deemed to be underwriting
commissions or discounts under the Securities Act.
We will pay most expenses related to the offer and sale of the shares
offered by the selling securityholders using this prospectus. The selling
securityholders, however, will pay any underwriting discounts and selling
commissions and the fees of their own attorneys.
22
<PAGE>
Any shares covered by this prospectus which qualify for sale under Rule
144 of the Securities Act may be sold under that Rule rather than under this
prospectus.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Amended Bylaws provide that we shall indemnify our directors and
officers to the fullest extent permitted by Nevada law, including circumstances
in which indemnification is otherwise discretionary under Nevada law.
In addition, American Technologies and each selling securityholder have
agreed to indemnify each other against certain liabilities, including certain
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons, we been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
EXPERTS
Our audited financial statements as of and for the years ended July 31, 1998 and
1997 incorporated by reference in this prospectus and elsewhere in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report, which includes
an explanatory paragraph with respect to the uncertainty regarding our ability
to continue as a going concern as discussed in Note 1 to the financial
statements.
LEGAL MATTERS
For the purpose of this offering, John M. Dab, our General Counsel, is
giving his opinion on the validity of the shares.
23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
SEC Registration Fee $ 1,280.09
Accountant's Fees and Expenses $ 7,500.00
Financial Printers $ 5,000.00
Miscellaneous $ 500.00
----------
Total $14,280.09
----------
----------
</TABLE>
- -------------
* Represents expenses relating to the distribution by the selling
securityholders under this prospectus prepared in accordance with the
requirements of Form S-3. These expenses will be borne by us on behalf of the
selling securityholders. All amounts are estimates except for the SEC
Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 78.751 of the Nevada General Corporation Law,
Article VI of our Amended Bylaws provides for the indemnification by American
Technologies, including suits brought by or on behalf of American Technologies,
of each director, officer, employee or agent thereof to the fullest extent
permitted by Nevada law.
As permitted by the Nevada General Corporation Law and Article VI of
our Amended Bylaws, maintains director's and officer's liability for its
directors and officers against certain liabilities.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<S> <C>
4.1 Form of 6% Convertible Debenture issued to certain Selling
Securityholders.(1)
4.2 Form of Warrant issued to certain Selling Securityholders.(1)
4.3 Form of 3% Convertible Debenture issued to a Selling
Securityholder.(2)
24
<PAGE>
<CAPTION>
4.4 Form of Secured Convertible Debenture issued to a Selling
Securityholder.(3)
4.5 Form Secured Redeemable Convertible Debenture issued to a Selling
Securityholder.(3)
4.6 Subscription Agreement dated July 22, 1999 by and between the
Company and Gaines P. Campbell, Jr.
4.7 Letter of Intent dated April 12, 1999, between the Company and
Security Capital Trading Inc.
4.8 Distribution Agreement dated December 17, 1998 by and between the Company
and Hungarofek.
5.1 Opinion of John M. Dab.(4)
23.1 Consent of John M. Dab (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.(4)
24.1 Power of Attorney(1)
</TABLE>
- ------------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on
December 3, 1998.
(2) Previously filed as an exhibit to Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on February 10, 1999.
(3) Previously filed as an exhibit to Amendment No. 4 to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on July 22, 1999.
(4) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
25
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Nevada Revised Statutes, the Certificate of
Incorporation of the Registrant, the Bylaws of the Registrant, Indemnification
Agreements entered into between the Registrant and it officers and directors, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of the such issue.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Monrovia, State of California, on this 23rd day of
August, 1999.
AMERICAN TECHNOLOGIES GROUP, INC.
By:/s/ Lawrence J. Brady
---------------------
Lawrence J. Brady
Chairman of the Board and
Chief Executive Officer
27
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Signature Title Date
--------- ----- ----
/s/ Lawrence J. Brady Chairman of the Board, August 23, 1999
- --------------------- Chief Executive Officer
LAWRENCE J. BRADY
/s/ Yan Lin Chief Financial Officer August 23, 1999
- ----------- Treasurer (Principal
YAN LIN Financial and Accounting
Officer)
Director of Research and August 23, 1999
- ---------------- Development and a Director
SHUI YIN LO
/s/ Charles Mccarthy Director August 23, 1999
- --------------------
CHARLES MC CARTHY
/s/ William Odom* Director August 23, 1999
- -----------------
WILLIAM ODOM
/s/ Larry Pressler Director August 23, 1999
- ------------------
LARRY PRESSLER
/s/ Alan Brooks Director August 23, 1999
- ---------------
ALAN BROOKS
*By:/s/ Lawrence J. Brady
---------------------
LAWRENCE J. BRADY
Attorney-in-Fact
28
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<S> <C>
4.1 Form of 6% Convertible Debenture issued to the Selling
Securityholders.(1)
4.2 Form of Warrant issued to the Selling Securityholders.(1)
4.3 Form of 3% Convertible Debenture issued to a Selling
Securityholders.(2)
4.4 Secured Convertible Debenture issued to a Selling
Securityholder.(3)
4.5 Form of Secured Redeemable Convertible Debenture issued to a
Selling Securityholder.(3)
4.6 Subscription Agreement dated July 22, 1999 by and between the
Company and Gaines P. Campbell, Jr.
4.7 Letter of Intent dated April 12, 1999, between the Company and
Security Capital Trading Inc.
4.8 Distribution Agreement dated December 17, 1998 by and between the
Company and Hungarofek.
5.1 Opinion of John M. Dab.(4)
23.1 Consent of John M. Dab (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.(4)
24.1 Power of Attorney(1)
</TABLE>
- --------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on
December 3, 1998.
(2) Previously filed as an exhibit to Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on February 10, 1999.
(3) Previously filed as an exhibit to Amendment No. 4 to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on July 22, 1999.
(4) To be filed by amendment.
29
<PAGE>
EXHIBIT 4.6
SUBSCRIPTION AGREEMENT
AMERICAN TECHNOLOGIES GROUP, INC.
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, CA 91016
Ladies and Gentlemen:
The undersigned Gaines P. Campbell, Jr. (the "Holder") understands that
American Technologies Group, Inc., a Nevada corporation (the "Company"), is
offering to sell to the Holder, and the Holder wishes to purchase $1,000,000
principal amount of the Secured Convertible Debentures due June 30, 2003 in
the form attached hereto as Exhibit A (the "Initial Debenture") and $500,000
principal amount of the Secured Redeemable Convertible Debentures due four
years after issuance (the "Second Debenture" and together with the Initial
Debenture the "Debentures"). The Holder further understands that the
offering and sale is being made without registration of the Debentures and
shares of Common Stock issuable upon conversion thereof (the Debentures and
shares of Common Stock issuable upon exercise thereof are hereinafter
sometimes referred to as the "Securities") under the Securities Act of 1933,
as amended (the "Securities Act"), and is being made only to "accredited
investors" (as defined in Rule 501 of Regulation D under the Securities Act).
1. SALE OF THE DEBENTURES. Upon the basis of the representations and
warranties, and subject to the terms and conditions set forth in this
Agreement, the Issuer covenants and agrees to sell and the Holder agrees to
purchase the Initial Debenture upon execution of this Agreement and the
Second Debenture upon the effective date (the "Effective Date") of the
Company's Registration Statement on Form S-3 (Registration No. 333-68327),
provided such Effective Date occurs on or before October 1, 1999.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder as follows on the date hereof and as of
the Effective Date.
(a) The Common Stock issuable upon the conversion of the
Debentures has been duly authorized and, when issued and delivered to the
Holder in accordance with the terms of said Debentures, will be validly
issued, fully paid and nonassessable.
(b) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Nevada with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or
<PAGE>
qualification, except where the failure so to register or qualify does not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company.
(c) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act. The Company has filed all material required
to be filed pursuant to all reporting obligations under either Section 13(a)
or 15(d) of the Exchange Act for a period of at least twelve (12) calendar
months immediately preceding the date hereof.
(d) Neither the issuance of the Securities, the execution,
delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transaction contemplated hereby (i)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body administrative agency
or other governmental body, agency or official or conflicts or will conflict
with or constitutes or will constitute a breach of, or a default under, the
certificate of incorporation or by-laws, or other organizational documents,
of the Company or any of its subsidiaries or (ii) conflicts or will conflict
with, or constitutes or will constitute a material breach of, or default
under, (or if any of the foregoing occurs it will not have a material adverse
affect on the Company) any material agreement, indenture, lease or other
instrument to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties may be bound, or
violates or will violate any statute, law, or any of its subsidiaries or any
of their respective properties, or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject.
(e) The execution and delivery of, and the performance by the
Company of its obligations under this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, and the Company has full corporate and legal power to enter into
this Agreement and perform all of its obligations hereunder.
(f) Exhibit B and Exhibit C attached hereto and incorporated
herein as though set forth in full set forth all patents, patent
applications, trademarks, trademark applications and other intangible
properties related to the Company's IE-TM- technology as described in the
referenced patents and patent applications and any technology related thereto
(all of the foregoing being herein called "Intangibles") that the Company
owns or has pending free and clear of all liens.
(g) Management of the Company will use its best efforts to have
the Company's Board of Directors appoint James Hennen to fill a vacancy on
the Board at its next meeting which is anticipated to be held within the next
30 days.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder hereby
represents and warrants to the Company as follows:
(a) The Holder is aware that no federal of state agency has passed
upon the Common Stock or made any finding or determination concerning the
fairness of this investment.
(b) The Holder has had an opportunity to ask questions of and
receive answers from representatives of the Company, concerning the terms and
conditions of this investment.
(c) The Securities for which the Holder hereby subscribes will be
acquired for the Holder's own account, for investment only and not with a
view toward resale or distribution in a manner which would require
registration under the Securities Act.
(d) The Holder acknowledges that, until a registration statement
is declared effective by the SEC, there are substantial restrictions on the
transferability of shares of Common Stock as required pursuant to federal and
state securities laws. The Holder further agrees to be responsible for
compliance with all conditions on transfer imposed by any state blue sky or
securities law. The Holder acknowledges that each certificate representing
the shares of Common Stock issued upon conversion of the Debentures prior to
the effective date of a registration statement covering such shares shall be
stamped with a restrictive legend substantially similar to the following:
"The securities evidences by this certificate have not been
registered under the United States Securities Act of 1933, as amended
(the "Act), or any state securities laws, and may not be offered or
sold, transferred, pledged, hypothecated or otherwise disposed of
except (i) pursuant to an effective registration statement under the
Act, (ii) to the extent applicable, Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of securities)
or (iii) if an exemption from registration under such Act is
available.
Notwithstanding the foregoing, the securities evidenced by this
certificate are also subject to the registration rights set forth in
that certain Subscription Agreement by and between the Holder hereof
and the Company, a copy of which is on file at the Company's principal
executive office."
(e) The Holder is an "accredited investor" as defined in Rule
501(a) under the Securities Act. The Holder has a net worth in excess of
$1,000,000. The Holder agrees to furnish any additional information requested
to assure compliance with applicable federal and state securities laws in
connection with the purchase and sale of the subscription.
4. RESTRICTIONS ON TRANSFER.
The Debenture shall not be sold or transferred unless (i) it first
shall have been registered under the Securities Act, (ii) the Company first
shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or
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transfer is exempt from the registration requirements of the Securities Act,
(iii) written notice of such transfer and the name and address of such
transferee has been received by the Company and (iv) the transferee shall
first agree in writing to be bound by all provisions of this Agreement.
5. INDEMNIFICATION.
(a) In the event that the Company registers under the Securities
Act any of the Securities held by the Holder, the Company shall indemnify and
hold harmless the Holder and each underwriter of such shares (including any
broker or dealer through whom such of the shares may be sold) and each
person, if any, who controls the Holder or any such underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") from and
against any and all losses, claims, damages, expenses or liabilities, joint
or several, to which they or any of them become subject under the Securities
Act or the Exchange Act or otherwise, and except as hereinafter provided,
shall reimburse the Holder and each of the underwriters and each such
controlling person, if any, for any legal or other expenses reasonable
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, or in the prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by the Company) or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
unless such untrue statement or omission was made in such registration
statement or prospectus in reliance upon and in conformity with information
furnished in writing to the Company in connection therewith by the Holder
(insofar as indemnification of the Holder is concerned) or any underwriter
(insofar as indemnification of any such underwriter is concerned) relating
thereto expressly for use therein. Promptly after receipt by the Holder or
any underwriter or any person controlling any of them, as the case may be, of
notice of a claim to which the foregoing indemnification applies, the Holder
or such other person shall notify the Company in writing of the commencement
thereof, and, subject to the provisions hereinafter stated, the Company shall
assume the defense of such action (including the employment of counsel, who
shall be counsel satisfactory to the Holder or such underwriter or
controlling person, as the case may be, and the payment of expenses) insofar
as such action shal relate to any alleged liability in respect of which
indemnity may be sought against the Company. The Holder or any underwriter
or any such controlling person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof but the
fees and expenses of such counsel shall not be at the expense of the Company
unless: (i) the employment of such counsel has been specifically authorized
by the Company, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties of any such action, suit or proceeding
(including any impleaded parties) include both the person or persons seeking
indemnification (the "indemnified person") and the Company and such
indemnified person shall have been advised by its counsel that representation
of the indemnified person and the Company by the same counsel would be
inappropriate under the applicable standards of professional conduct (whether
or not such representation by the same counsel has been proposed) due to
actual or potential differing interests between them (in which case the
Company shall not have
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the right to assume the defense of such action, suit or proceeding on behalf
of such indemnified person). The Company shall not be liable to indemnify
any person for any settlement by such person of any such action effected
without the Company's consent.
(b) The Holder shall indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all losses, claims, damages, expenses or liabilities or actions
to which they or any of them become subject under the Securities Act or the
Exchange Act or otherwise, and shall reimburse the Company, its officers and
directors and each such controlling person, if any, for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims damages, expenses, liabilities or
actions arise out of or are based upon any information relating to the Holder
furnished by or on behalf of the Holder in writing specifically for inclusion
in such registration statement.
(c) Any losses, claims, damages, liabilities and reasonable
expenses for which an indemnified party is entitled to indemnification under
Sections 6(a) and 6(b) of this Agreement shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities
and expenses are incurred.
6. BROKERS. Each of the Company and Holder hereby indemnifies and
holds the other harmless from any liability for any brokers' or finders' fee
with respect to this Agreement or the transactions contemplated hereby for
which the Company or the Holder, as the case may be, is responsible.
7. WAIVER AMENDMENT. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument
in writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
8. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, their respective successors and
assigns, and no other person shall have any right or obligation hereunder.
Neither this Agreement nor any right, remedy, obligation or liability without
the prior written consent or other party and any assignment in violation
hereof shall be void, provided that the Holder may assign its rights and
obligations hereunder to any person acquiring some or all of the Securities,
provided that such transfer (i) is made in accordance with Section 3 hereof
and is not pursuant to an effective registration statement and (ii) such
person agrees in writing to be bound by the terms hereof.
9. CHOICE OF LAW: CONFLICT OF LAW: JURISDICTION AND VENUE. In the
case of any dispute, question, controversy or claim arising among the parties
hereto which shall arise out of or in connection with this Agreement, the
same shall be submitted to arbitration before a panel of three arbitrators in
Chattanooga, Tennessee in accordance with the rules of the American
Arbitration Association. One arbitrator shall be appointed by the party or
parties bringing the claims ("Claimant") and one arbitrator shall be
appointed by the party or parties defending the
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<PAGE>
claim ("Respondent"). The arbitrators selected by such parties shall be
selected within thirty (30) days after notification by the Claimant to the
Respondent that it has determined to submit such dispute, question,
controversy or claim to arbitration. The two arbitrators so selected shall
select a third arbitrator within thirty (30) days after the selection of the
arbitrator selected by such parties. Should a party fail to select an
arbitrator within the specified time period, or should the arbitrators
selected by the parties fail to select a third arbitrator, the missing
arbitrator or arbitrators shall be appointed by the Chattanooga, Tennessee
office of the American Arbitration Association. The decision of the panel
shall be final and binding on the parties and enforceable in any court of
competent jurisdiction. The costs of the arbitration will be imposed upon the
Claimant and Respondent as determined by the arbitration panel or, failing
such determination, will be borne equally by the Claimant and the Respondent.
The successful or prevailing party or parties shall be entitled to recover
reasonable attorneys fees in addition to any other relief to which it may be
entitled.
10. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
11. MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original but all of
which will constitute one and the same instrument. However, in enforcing any
party's rights under this Agreement it will be necessary to produce only one
copy of this Agreement signed by the party to be charged.
12. NOTICE. Any notice to be given or to be served upon any party in
connection with this Agreement must be in writing and will be deemed to have
been given and received upon confirmed receipt, if sent by facsimile, or two
(2) days after it has been submitted for delivery by Federal Express or an
equivalent carrier, charges prepaid and addressed to the following addresses
with a confirmation of delivery:
If to the Company, to:
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, CA 91016
Attn: Lawrence J. Brady
Telephone: (626) 357-5000
Facsimile: (626) 357-4464
If to the Holder, to:
Gaines P. Campbell, Jr.
1341 Birmingham Highway
Chattanooga, Tennessee 37419
Telephone: (423) 825-0815
Facsimile: (423) 825-1037
6
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With a copy to:
Thomas A. Caldwell
Baker, Donelson, Bearman & Caldwell
1800 Republic Center
633 Chestnut Street
Chattanooga, TN 37450-1800
Telephone: (423) 756-2010
Facsimile: (423) 756-3447
The undersigned acknowledges that this Agreement shall not be effective unless
and until accepted by the Company as indicated below.
Dated this 13th day of July, 1999.
By: Gaines P. Campbell, Jr.
-------------------------
Gaines P. Campbell, Jr.
THIS SUBSCRIPTION IS AGREED TO AND ACCEPTED BY THE COMPANY ON THE 13TH DAY
OF JULY, 1999.
AMERICAN TECHNOLOGIES GROUP, INC.
By: Lawrence J. Brady
--------------------------
Name: Lawrence J. Brady
Title: Chief Executive Officer
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EXHIBIT 4.7
SECURITY CAPITAL TRADING, INC.
520 Madison Avenue, 10th Floor, New York, New York 10022
April 12, 1999
American Technologies Group
1017 South Mountain Avenue
Monrovia, California 91016
Attention: Lawrence Brady
Chief Executive Officer
Gentlemen:
This will confirm Security Capital Trading, Inc.'s intent to act as the
Managing Underwriter (the "Representative") in connection with the proposed
public offering of shares of Cumulative Convertible Preferred Stock (the
"Preferred Stock") of the American Technologies Group (the "Company"). It is
contemplated that the Representative shall underwrite, on a firm commitment
basis, 1,000,000 shares of Preferred Stock at $10.00 per share which will
result in gross proceeds of approximately $10,000,000. Each share of
Preferred Stock shall have a liquidation preference equal to $10.00 per share
plus all accrued but unpaid dividends. Each share of Preferred Stock shall
be convertible into shares of Common Stock at a per share price, based upon
market conditions, equivalent to approximately 120% to 130% of the closing
bid price of a share of Common Stock on the Effective Date; and shall receive
cash cumulative dividends, at the rate of 10% per annum, payable
semi-annually. The Preferred Stock shall not be subject to call for
redemption for three years from the Effective Date. Thereafter, the Company
may call the Preferred Stock for redemption in their entirety at the
liquidation value thereof (plus accrued and/or unpaid dividends) on thirty
(30) days' written notice if the closing bid price of the Common Stock for
twenty (20) consecutive trading days ending not more than ten (10) days prior
to when notice of the call for redemption is given equals or exceeds 150% of
the closing bid price of the Common Stock on the Effective Date. On the
Effective Date, before giving effect to the shares of Preferred Stock to be
sold in the proposed public offering, and any Private Placement where
Security Capital Trading acts as the Placement Agent, there shall be no more
than 55,000,000 shares of Common Stock outstanding after giving effect to:
(a) all issued and outstanding shares of Common Stock and (b) any and all (i)
securities with equivalent rights as the Common Stock, (ii) shares of Common
Stock, or equivalent securities, issuable upon exercise of options, warrants
and other contract rights, and (iii) securities convertible directly or
indirectly into shares of Common Stock or such equivalent securities. Our
acting as Managing Underwriter shall be subject to the following general
terms and qualifications.
<PAGE>
1. The Company will, as soon as practicable, file with the Securities
and Exchange Commission ("SEC") a Registration Statement ("Registration
Statement") on Form S-1 (or other appropriate form) covering the proposed
public offering (including the shares of Common Stock underlying the
Preferred Stock) which shall include all audited and unaudited financial
statements for such periods as may be required by such Form. Such
Registration Statement, at the time it becomes effective, shall be in form
and substance satisfactory to the Representative and to the Company and to
their respective counsel. The Company hereby represents that no person,
corporation, trust, partnership, association or other entity has the right to
include and/or register any securities of the Company in the Registration
Statement hereinafter referred to, or any other registration rights.
2. On or about the Effective Date of the Registration Statement, it is
contemplated that the Representative shall enter into an Underwriting
Agreement with the Company in form and in substance satisfactory to counsel
for the Representative and the Company. The Underwriting Agreement will
provide that the Representative shall purchase on a firm, and not on any
other basis, the securities to be offered at a discount equaling ten percent
(10%) of the public offering price thereof. Said Underwriting Agreement will
further provide that the Representative will have an option to purchase all
or part of an additional fifteen percent (15%) of the securities to be
offered from the Company to cover any over-allotments for a period of forty
five (45) days from the effective date of the Registration Statement upon the
same terms and conditions and shall contain such other terms and conditions
as are customary in such agreements.
3. It shall be the Company's obligation, whether or not the offering
is consummated, to bear all expenses in connection with the proposed
offering, including, but not limited to the following: filing fees, printing
costs, experts, expense of tombstone advertisements, advertising costs and
expenses, including but not limited to costs and expenses in connection with
the "road show," information meetings and presentations, registrar, transfer
agent fees, postage and mailing expenses with respect to the transmission of
prospectuses, Company counsel and accounting fees, due diligence fees, issue
and transfer taxes, if any, and Blue Sky counsel fees and expenses. It is
agreed that the Representative's counsel shall perform the required Blue Sky
legal services. In this connection, Blue Sky applications shall be made in
such states and jurisdictions as shall be requested by the Representative
provided that such states and jurisdictions do not require the Company to
qualify as a foreign corporation or to file a general consent to service of
process.
4. In addition to the compensation paid pursuant to Paragraph 2, the
Company agrees to pay the Representative a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds of the proposed public
offering, $50,000 of which is due and payable upon execution of this letter
of intent.
If the Representative does not or fails to enter into the proposed
Underwriting Agreement, and the reasons therefor are reasonably related to a
material adverse change in the business or financial results, prospects or
condition of the Company, or a material adverse change in market conditions
or if the proposed public offering is not completed because of the Company's
actions or failure to take such actions as are reasonably required hereunder
and the Representative is prepared to perform in accordance with the terms
herein, then, in any such case, the Company agrees to promptly pay the
Representative its actual out-of-pocket expenses (on an accountable
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<PAGE>
basis), provided that the advances referred to in paragraph 4 above shall be
first offset against such expenses. In addition, the Company shall remain
liable for all Blue Sky counsel fees and expenses and Blue Sky filing fees.
5. The Company shall issue and sell, at the closing of the proposed
underwriting, to the Representative and/or its designees, five (5) year
warrants to purchase such number of shares of Preferred Stock as shall equal
ten percent (10%) of the number of shares of Preferred Stock to be offered
(excluding the over-allotment option) being underwritten for the account of
the Company at a price of $.0001 per warrant (the "Warrants"). The Warrants
shall be exercisable at any time during a period of four (4) years commencing
at the beginning of the second year after their issuance and sale at a price
equaling 120% of the initial public offering price of the securities to be
offered. The Company agrees that, for a period of seven (7) years from the
date of the closing of the public offering of the securities to be offered
(the "Closing"), if the Company intends to file a Registration Statement or
Statements for the public sale of securities for cash (other than a Form S-8,
S-4 or comparable Registration Statement), it will notify all of the holders
of the Warrants and/or underlying securities and if so requested it will
include therein material to permit a public offering of the securities
underlying said Warrants at the expense of the Company (excluding fees and
expenses of the holder's counsel and any underwriting or selling
commissions). In addition, for a period of five (5) years from such date,
upon the written demand of holder(s) representing a majority of the Warrants,
the Company agrees, on one occasion, to promptly register the underlying
securities at the expense of the Company (excluding fees and expenses of the
holder's counsel and any underwriting or selling commissions). In addition,
for a period of five (5) years from such date, upon the written demand of any
holder, the Company agrees to promptly register the underlying securities at
the expense of such holder.
6. Except upon the consent of the Company and the Representative, all
officers and directors and holders of five percent (5%) or more of shares of
Common Stock, and securities exercisable, convertible or exchangeable for
shares of Common Stock, shall agree not to, directly or indirectly, offer,
sell, transfer, pledge, assign, hypothecate or otherwise encumber any shares
or convertible securities whether or not owned, or otherwise dispose of any
interest therein under Rule 144 or otherwise, for a period commencing on the
Effective Date and ending twelve (12) months from the Effective Date of the
Registration Statement. An appropriate legend shall be marked on the face of
stock certificates representing all of such shares of Common Stock. In
addition, without the consent of the Representative, the Company shall not
sell or offer for sale any of its securities for a period of thirteen (13)
months following the Effective Date of the Registration Statement except
pursuant to options and warrants existing on the date hereof.
7. On the Effective Date of the Registration Statement, the Company
shall have an authorization of capital stock reasonably satisfactory to the
Representative.
8. The Company represents that consummation of the transactions
contemplated herein will not as of the Effective Date of the Registration
Statement result in a material breach of any of the terms, provisions or
conditions of any written agreement to which it is a party.
9. The Company's financial and operational history, its present
condition, financial and otherwise, and its prospects, shall be substantially
as represented to the Representative. The
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<PAGE>
Company shall supply the Representative with such financial statements,
contracts and other corporate records and documents as the Representative
shall deem necessary and it shall supply the Representative's counsel with
all financial statements, contracts, documents and other corporate papers as
may be requested by them. In addition, the Representative shall be fully
informed of any events which might have a material effect on the financial
condition of the Company. If, in the opinion of the Representative, the
condition of the Company, financial or otherwise, and its prospects do not
fulfill its expectations, the Representative shall have the sole discretion
to review and determine its continued interest in the proposed underwriting.
In this connection, the Representative expects that, prior to the initial
filing of the Registration Statement, the Company shall have entered into
employment agreements with each of the management personnel as requested by
the Representative and purchased "key-person" life insurance on each of their
lives, of which the Company shall be sole beneficiary, all on terms and
conditions reasonably satisfactory to the Representative.
10. It is understood that the Representative may enter into other
agreements with broker/dealers who shall act as co-underwriters and/or
dealers in connection with the proposed public offering contemplated herein.
11. The Representative shall not be responsible for any expense of the
Company or others for any charges or claims related to the proposed financing
or otherwise if the sale of securities to be offered contemplated by this
letter is not consummated.
12. The Company agrees that as of the Effective Date of the
Registration Statement there will be no claims or payments for services in
the nature of a finder's fee with respect to the proposed public offering or
any other arrangements, agreements or understandings that may affect the
Representative's compensation, as determined by the National Association of
Securities Dealers, Inc.
13. The Underwriting Agreement shall provide that the Company and its
subsidiaries will grant to the Representative a right of first refusal for a
period of three (3) years after the Effective Date of the Registration
Statement for any sale of securities to be made by the Company or any of its
present or future affiliates or subsidiaries.
14. Prior to the initial filing of the Registration Statement, the
Representative will use its best efforts to place up to a maximum of $1.5
million worth of 12% unsecured promissory notes (the "Notes"). The Notes
will be repaid upon the earlier of the closing of the proposed public
offering and a date to be specified in the Notes. For every purchase of
$250,000 worth of Notes in the Private Placement, the purchaser will also
receive 100,000 common stock purchase warrants, each warrant exercisable into
one share of the Company's Common Stock at an exercise price of $0.75 per
share. The Placement Agent Agreement shall state that the Representative
shall receive a fee equal to 10% of the offering price of the Notes sold in
addition to a non-accountable expense allowance equal to 3% of the gross
proceeds of the proposed Private Placement.
As long as the Representative is proceeding in good faith, the Company
covenants and agrees not to negotiate with any other underwriter or other
person relating to a possible public offering of securities pending the
completion of the public offering contemplated herein. Please
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affix your signature in the place designated and by doing so, you will
confirm our general understanding in connection with the proposed public
offering referred to herein, subject to the execution of an Underwriting
Agreement. This letter shall serve as an indication of our mutual intention
as regards to the proposed public offering stated herein and shall not bind
either party except to the responsibilities referred to in paragraphs 4 and
11 herein. No binding commitment upon either party to proceed with the
offering will arise until the execution of the Underwriting Agreement.
Very truly yours,
SECURITY CAPITAL TRADING, INC.
By: /s/ Ronald Heineman
-------------------------
Name: Ronald Heineman
Title: President
The arrangements in the foregoing
letter are satisfactory to us:
AMERICAN TECHNOLOGIES GROUP
By: /s/ Lawrence J. Brady
------------------------------
Name: Lawrence J. Brady
Title: Chief Executive Officer
5
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EXHIBIT 4.8
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is made and entered into
as of December 17, 1998, by and between HUNGAROFEK, a Hungarian corporation
("Distributor"), and AMERICAN TECHNOLOGIES GROUP, INC., a Nevada corporation
("Supplier").
R E C I T A L S:
WHEREAS, Supplier desires to develop demand for and sell its The
Force-Registered Trademark- airborne fuel treatment line of products (the
"products") in Hungary and to appoint Distributor to act as the distributor
of the Products in Hungary, subject to the terms and conditions of this
Agreement; and
WHEREAS, Distributor possesses unique skills and adequate resources to
distribute the Products in Hungary;
WHEREAS, Distributor desires to engage in the sale and distribution of
the Products in Hungary and to be designated as a distributor of the Products
in Hungary, subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, Supplier and Distributor hereby agree as
follows:
1. DISTRIBUTORSHIP.
1.1 APPOINTMENT. Upon the terms, and subject to the terms and
conditions, contained herein, Supplier hereby appoints Distributor as its
exclusive distributor of the Products in Hungary. By said appointment,
Supplier grants Distributor the right to purchase Products from Supplier for
resale and distribution in Hungary. Notwithstanding anything set forth in
this Section 1.1, Distributor may lose its exclusive right to distribute as
provided in Section 2.1, and the Agreement may be terminated as provided in
Section 7.
1.2 ACCEPTANCE OF APPOINTMENT. Distributor hereby accepts appointment
as Supplier's distributor of Products in the Territory, as provided in
Section 1.1 above, and hereby agrees fully and faithfully to perform and
discharge all of its duties, obligations and responsibilities as set forth in
this Agreement. Distributor hereby accepts the proprietary and intellectual
property rights of Supplier in the Products.
<PAGE>
2. PURCHASES AND SALES OF PRODUCTS.
2.1 MINIMUM SALES REQUIREMENTS.
(a) Distributor shall purchase (place a purchase order and make
the payment required by Section 4.1) the minimum value of Products set forth
below (the "Sales Requirements"). In the event Distributor fails to meet the
Sales Requirements (each such failure, a "Triggering Event"), Supplier shall
have the option to give Distributor notice ("Forfeiture Notice"), within
thirty (30) days of the Triggering Event, of Distributor's forfeiture of its
right to exclusively sell the Products in the Territory. After Supplier
gives Distributor a Forfeiture Notice, Supplier may appoint one or more other
distributors for the Products in the Territory.
(b) The Sales Requirement is the purchase of one container load of
Products constituting a minimum purchase order of at least US$100,000 per
month commencing December, 1998 and ending November, 1999.
(c) Supplier shall not be liable for any delay in the manufacture
or delivery of the Products pursuant to the terms and provisions of this
Agreement, or for any damages suffered by Distributor by reason of such
delay, when such delay is, directly or indirectly, caused by, or in any
manner arises from, earthquakes, fires, floods, accidents, riots, acts of
God, war, governmental interference or restrictions, mechanical breakdowns,
strikes, labor difficulties, or any other cause beyond the reasonable control
of Supplier, whether similar or dissimilar to the foregoing.
2.2 ORDERING PROCEDURE. Purchase of the Products shall be made by
Distributor by means of purchase orders submitted to Supplier. Each such
purchase order shall specify, INTER ALIA, the number of units of each Product
ordered by Distributor, the desired date and location of delivery.
2.3 TITLE AND RISK OF LOSS. Title to the Products and all risk of loss
shall pass from Supplier to Distributor at the time and place of Supplier's
delivery of the Products to a common carrier for delivery to Distributor in
accordance with the delivery terms prescribed in each purchase order,
notwithstanding that Supplier may retain rights of possession or repossession
to ensure collection of the purchase price thereof. Distributor shall be
solely responsible for insuring the Products after delivery to a common
carrier for delivery to Distributor. Distributor shall designate the common
carrier used for transportation of the Products. Supplier shall not be
responsible for any delay caused by the carrier.
2
<PAGE>
2.4 INSPECTION AND REJECTION. Distributor shall have the obligation to
inspect the Products delivered to it within fifteen (15) business days after
its receipt thereof at Distributor's delivery point, and unless any claim is
made within said fifteen (15) business day period, Distributor shall have
conclusively deemed to have accepted in good and marketable condition all the
Products delivered to it.
3. PRODUCT PRICES. The prices at which Supplier shall supply Distributor
with Products (the "Supply Price") are:
Fleet Formula $4.39 per unit, 48 individual units to a case
Auto Formula 1 & 2 $2.37 per unit, 75 individual units to a case
Auto Formula 1 $7.67 per box of 3 individual units, 24 boxes per case
Auto Formula 2 $10.03 per box of 4 individual units, 24 boxes per case
All prices are delivered F.O.B. place of manufacturing.
4. PAYMENT FOR PRODUCTS.
4.1 PAYMENT TERMS. Payment shall be made by bank wire, 50% at time of
order and 50% upon delivery of Products to Distributor's common carrier.
4.2 INVOICES. Supplier shall invoice Distributor for the purchase
price of the Products upon Supplier's delivery of such Products to a common
carrier for shipment to Distributor.
5. PRODUCT WARRANTY. The sole warranty given by Supplier regarding any
Product is that it shall be free from design or manufacturing defects.
6. TERM. Subject to the termination provisions of Section 7 hereof, the
term of this Agreement shall be for a one year period commencing on the date
of this Agreement (the "Initial Term"). Notwithstanding the aforesaid, in
the event Distributor meets and continues to meet the Sales Requirements and
agreement upon revised Sales Requirements for the renewal term, the term of
this Agreement shall be extended for consecutive three (3) year terms
("Renewal Term").
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<PAGE>
7. TERMINATION. Subject to the provisions of Section 2.1 hereof, this
Agreement shall remain in full force, unless earlier terminated as follows:
(a) By mutual consent of the parties in writing at any time.
(b) By either party upon giving written notice to the other party
if such other party is in default of any term or provision hereunder, and
such default is not cured within thirty (30) days of written notice of such
default. Any such notice shall identify the nature of the claimed default and
the action or actions required to cure each claimed default.
8. NOTICES. All notices, requests, demands and other communications which
may be given or are required to be given under this Agreement shall be in
writing and in the English language. All notices shall be sent by facsimile
transmission and confirmed by overnight courier, and shall be deemed given on
the date of such facsimile transmission. All notices shall be addressed as
set forth below:
IF TO DISTRIBUTOR: HungaroFek
H-3441 Mezokeresztez
Ipartelep
PF12 HUNGARY
IF TO SUPPLIER: American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016 USA
Attention: Chief Executive Officer
9. GOVERNING LAW. This Agreement has been executed and delivered in, and
shall be governed by and construed in accordance with the laws of the State
of California without regard to its conflict of laws provisions.
10. RESOLUTION OF DISPUTES. Any controversy or claim relating to this
Agreement (whether contract, tort, or both) or to the breach of this
Agreement shall be arbitrated by and in accordance with the then existing
commercial arbitration rules of the American Arbitration Association, in Los
Angeles, California. The arbitrator may render a judgment awarding actual
compensatory damages only, and no consequential, incidental, or punitive
damages may be awarded by the arbitrator. Judgment on the award rendered by
such arbitrator may be entered in any court having jurisdiction. Nothing in
this Section 10 shall affect Supplier's right to bring an action or
proceeding against Distributor in the courts of any jurisdiction where the
purpose of such action or proceeding is to (i) seek injunctive relief against
Distributor,
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or (ii) collect moneys due and owing from Distributor to Supplier on account
of Distributor's failure to pay for Products or services provided by
Supplier. Service of process in any such action or proceeding brought
hereunder may be made by mailing copies of such process to the address of the
parties provided for in Section 8 hereto. In the event of any action or
proceeding to enforce this Agreement, the successful or prevailing party will
be entitled to recover its attorneys' fees actually incurred and other costs
incurred in any such action or proceeding, in addition to any other relief to
which it may be entitled. Each party hereto consents to the personal
jurisdiction of the AAA and Federal and State courts in Los Angeles County,
California.
11. WAIVER AND AMENDMENT. No waiver, amendment, modification or change of
any provision of this Agreement shall be effective unless and until made in
writing and signed by all of the parties hereto. No waiver, forbearance or
failure by any party hereto of its right to enforce any provision of this
Agreement shall constitute a waiver or estoppel of such party's right to
enforce any other provision of this Agreement or a continuing waiver by such
party of compliance with any provision.
12. ENTIRE AGREEMENT. This Agreement (including the exhibits and schedules
hereto, each of which is incorporated herein and made a part of this
Agreement) constitutes the entire agreement and understanding of the parties
hereto and terminates and supersedes any and all prior agreements,
arrangements and understandings, both oral and written, express or implied,
between the parties hereto concerning the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
"Distributor" "Supplier"
HUNGAROFEK AMERICAN TECHNOLOGIES GROUP INC.
By: /s/ Palatics Attila By: /s/ Lawrence J. Brady
----------------------- -------------------------
Name: Palatics Attila Name: Lawrence J. Brady
Its: President Its: Chief Executive Officer
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