Document:

Exhibit
      10.16

     

    Healthcare
      Quality Solutions, Inc.

     

    Information
      Management and Operations Services Agreement

     

    This
      Agreement is entered into as of February 24, 2003 (the AEffective
      Date@)
      by and
      between Healthcare Quality Solutions, Inc., (hereinafter AHQS@)
      a
      Florida corporation with a principal place of business at 200 South Hoover
      Boulevard, Building 205, Tampa FL 33607, and Amedisys, Inc., (hereinafter
AAMEDISYS@)
      with a
      principal place of business at 11100 Mead Road, Suite 300, Baton Rouge, LA
      70816.

     

    1.  HQS
      Service

     

    1.1.  Service
      Access.
      HQS
      shall permit AMEDISYS, under the terms and conditions specified herein, to
      access and to use, on a non-exclusive basis, the HQS Services defined and
      contracted on the attached Service Exhibits (the AService@).
      The
      Service is a HQS-hosted, Internet accessed, multi-user, post-acute health care
      information system that permits AMEDISYS to accomplish certain information
      management functions, as described in the Service Exhibits. Prior to allowing
      access to and use of the Service by AMEDISYS, AMEDISYS shall agree to abide
      by
      the terms and conditions of this Information Management and Operations Services
      Agreement (AAMEDISYS
      Agreement@).

     

    1.2.  Service
      Modifications.
      From
      time-to-time HQS may modify the Services specified in the Service Exhibits.
      In
      addition, HQS may offer to the market new or enhanced products and services
      that
      AMEDISYS may choose to use. In the event that Amedisys chooses to use these
      new
      and enhanced products and services they will be defined and contracted for
      on
      Service Exhibits that will be attached to and made part of this Agreement.
      HQS
      reserves the right to revise the prices for these modified, enhanced or new
      products and services. Such changes, if any, will be announced 30 days prior
      to
      their effective date and will be incorporated into Exhibit
      A,
      the
“HQS
      Data Services Pricing Schedule.”
In
      no
      event shall any revision to the prices for these modified or enhanced products
      and services exceed 5% of the previous AMEDISYS contract amount in any given
      calendar year.

     

    1.3.  Equipment.
      The
      Service shall be accessible from remote personal computers and/or servers,
      and
      other access devices subject to HQS’ Service and prior written consent and
      system compatibility. AMEDISYS shall be responsible for all charges associated
      with connecting to the Service and Amedisys shall be responsible for purchasing,
      installing, configuring and maintaining all equipment and software necessary
      to
      access and use the Service (collectively, the
      AEquipment@).
      HQS
      will
      provide AMEDISYS with a list of the specifications and Equipment recommended
      for
      accessing the Service, which AMEDISYS is responsible for implementing. In no
      event, however, shall such lists be considered an endorsement or warranty by
      HQS
      of any Equipment. HQS shall not be responsible for any Equipment or other
      products or services ordered or used by AMEDISYS acquired from any third party.
      HQS further agrees to provide training on the server configuration, application
      and system software and appropriate settings for each, in addition to third
      party vendors. HQS further agrees to provide a current system architecture
      document detailing server configurations and a current application
      infrastructure document detailing the application software components. HQS
      agrees to present this information to AMEDISYS and be available for questions
      and answers relative to these documents.

     

    1.4.  Service
      Servers.
      The
      Service servers shall remain the property of HQS and shall not be required
      to be
      dedicated to serve AMEDISYS or any or any other person or entity exclusively.
      HQS has partnered with Qwest Communications and has located these servers in
      an
      off-site hosting facility (Qwest CyberCenter) that provides:

     

    (a) Disaster
      resiliency

     

    (b) Power
      redundancy

     

    (c) Redundant
      Internet access

     

    (d) Fire
      detection and suppression

    
      
        
        

      

      
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    (e) Environmental
      control

     

    (f) 24x7
      system and monitoring and management

     

    (g) 24x7
      security guards

     

    (h) Indoor
      and outdoor surveillance cameras

    

    In
      addition to the above the application components are architected to maximize
      system uptime through built in redundancy and independence throughout the
      application infrastructure. Redundant hardware for key application components
      is
      available to minimize downtime in the event of failure.

     

    HQS
      agrees to provide similar attributes in the event that a different hosting
      vendor is selected.

     

    1.5.  License.
      In
      order to permit access to and use of the Service by AMEDISYS, HQS shall permit
      AMEDISYS access to and use of the Service and the authorized data associated
      with the Service to the extent necessary to perform the tasks contemplated
      in
      this Agreement under the terms and conditions contemplated in this
      Agreement.

     

    1.6.  Connections.
      HQS
      shall maintain the connection of its servers with the Internet through a
      reputable Internet connection provider to permit appropriate, reliable and
      redundant Internet access. HQS shall not be responsible for the function,
      performance or condition of any equipment, software, data or communication
      line
      outside of the HQS servers, except as may be a consequence of not having said
      access provided through a reputable Internet service provider. AMEDISYS shall,
      at AMEDISYS sole expense, set up a relationship between AMEDISYS and a reputable
      Internet connection provider in order to permit appropriate Internet access
      to
      the Service for the Equipment. HQS shall not be responsible for maintaining
      or
      paying for that relationship or for maintaining any connection between AMEDISYS
      and the Internet.

     

    1.7.  Help
      Desk.
      HQS
      shall maintain a help desk (the
      AHelp
      Desk@)
      that
      shall provide telephone advice and guidance for AMEDISYS, as defined in HQS
      support policy (the AHQS
      Support Policy@)(See
      Appendix
      1.7 for the current version) concerning the effective use of the Service. The
      Help Desk is designed to provide assistance on matters that are specific to
      the
      Service and not on more general matters such as computers, printers, networks,
      computer programming, use of third-party software, use of the Internet or use
      of
      computers generally. HQS may, in HQS sole discretion on a case-by-case basis
      and
      subject to additional service charges as defined in the HQS Support Policy,
      also
      provide telephone advice and guidance concerning these more general
      matters.

     

    1.8.  Use
      of the Service.
      Except
      as expressly provided in this Agreement, AMEDISYS shall not be entitled to
      license, sell, assign, rent, loan, distribute or otherwise make the Service
      available for use by itself or through any other party. In no event shall
      AMEDISYS copy, alter, reverse engineer, decompile, disassemble, re-engineer
      or
      otherwise attempt to discover the source code or the structural framework of
      the
      Service or its Software except as provided in the Escrow Agreement between
      the
      parties to be executed within 30 days of the effective date of this
      Agreement.

     

    1.9.  Billing
      for Services and Accounts Receivable.
      HQS
      shall invoice AMEDISYS in accordance with the AMEDISYS Agreement, the HQS Data
      Services Pricing Schedule, or as amended by AMEDISYS per Paragraph
      1.2,
      and
      HQS
      accounting policies in effect at the time. HQS reserve the right to restrict
      Service to AMEDISYS if AMEDISYS is in default of AMEDISYS
      Agreement.

     

    1.10.  Education.
      HQS
      shall provide education services in the effective use of the Service and the
      entry and recovery of data using the Service. If AMEDISYS requires that any
      individuals receive additional education, HQS shall schedule such education
      consistent with HQS other business commitments and shall charge for such
      education as an additional service as set forth in Section 4 below.

     

    
      
        
        

      

      
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    2.     
      GENERAL
      COOPERATION

     

    HQS
      and
      AMEDISYS jointly recognize that the achievement and performance of HQS
      respective duties and responsibilities under this Agreement and the proper
      and
      full function of the Service require cooperation and coordination between the
      parties. HQS and AMEDISYS shall each designate a representative who shall be
      reasonably available during AMEDISYS regular office hours to confer together
      in
      order to promote the efficient performance of this Agreement and to promote
      clear communication between the parties regarding that performance. Each party
      shall promptly report to the other any Service, equipment or software
      malfunction, error, breakage or security breach that involves AMEDISYS or
      AMEDISYS data that AMEDISYS detects or that AMEDISYS believes is imminent or
      is
      likely to have occurred as it relates to the Service or the use
      thereof.

     

    3.     
      DUTIES
      AND RESPONSIBILITIES

     

    3.1.  DUTIES
      AND RESPONSIBILITIES OF AMEDISYS

     

    3.1.1  Information,
      AMEDISYS shall provide HQS with complete, accurate and timely information needed
      to permit HQS to provide the services contemplated in this Agreement and the
      attached Service Exhibits.

     

    (a)  AMEDISYS
      shall promptly enter into the Service all information necessary to populate
      the
      appropriate Service forms and/or screens; and

     

    (b)  AMEDISYS
      shall code and record all patient services in conformity with all applicable
      statutory and regulatory requirements, and AMEDISYS shall enter all patient
      data
      changes into the Service.

     

    3.1.2  Access.
      AMEDISYS shall require one or more of AMEDISYS personnel to complete the course
      of education offered by HQS for use of the Service. AMEDISYS shall at all times
      maintain at least two (2) individuals at each site who are proficient in the
      Service use, and AMEDISYS shall designate one or more such individuals as
      authorized to access and use the Service on AMEDISYS behalf, AMEDISYS shall
      assign a manager at each site to set the level of their privileges. AMEDISYS
      shall not permit persons without authorization to access or use the
      Service.

     

    3.1.3  Usage.
      AMEDISYS shall comply with and shall cause all of AMEDISYS employees, agents
      and
      other personnel to comply with the requirements and conditions imposed by this
      Agreement.

     

    3.1.4  Consents.
      AMEDISYS shall be solely responsible to make disclosures and to obtain consents
      from patients and payers as necessary to permit HQS to perform the Service
      and
      to access and use the data as contemplated in this Agreement. AMEDISYS shall
      at
      all times be solely responsible to ensure that (i) AMEDISYS and AMEDISYS
      personnel are duly authorized to submit the data they enter using the Service,
      (ii) AMEDISYS and AMEDISYS personnel are duly authorized to access the data
      requested or retrieved in connection with use of the Service, and (iii) HQS
      is
      authorized to receive, process and use the data that AMEDISYS enters using
      the
      Service as contemplated by the Agreement.

     

    3.2.  DUTIES
      AND RESPONSIBILITIES OF HEALTHCARE QUALITY SOLUTIONS

     

    HQS
      will
      regularly upgrade their equipment, software, and staff to insure that AMEDISYS’
work will be processed in a timely manner and meet the following performance
      goals:

     

    3.2.1  Upgrades.
      Regularly update the software and process to meet regulatory changes in the
      required time frame for said regulatory changes to have effect.

     

    
      
        
        

      

      
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    3.2.2  Interim
      File Processing. Post assessments on the website for editing within 3.5 hours
      of
      receiving the assessment images from AMEDISYS. Export to AMEDISYS unedited
      assessment data every 2 hours between the hours of 8:00 AM and 6:00 PM EST
      or on
      an alternate schedule as mutually agreed in writing.

     

    3.2.3  Daily
      Export. Export nightly to AMEDISYS edited assessment data that was marked as
      AReviewed@
      in PPS
      Editor the previous day.

     

    3.2.4  Simultaneous
      Editing. Allow all AMEDISYS agencies utilizing the HQS services to edit their
      assessments simultaneously, except that by the design of the application, a
      particular assessment cannot be edited simultaneously by two users in PPS
      Editor. All AMEDISYS agencies will be allowed to execute reporting program
      in
the
      APPS
      Advantage Suite@
      simultaneously.

     

    3.2.5  Resources.
      HQS agrees to deploy appropriate system resources as required to maintain
      commercially acceptable response times that enable users to perform their duties
      in a functional environment. HQS will notify AMEDISYS of any corrective actions
      AMEDISYS may take if the slow response times are not a result of HQS system
      resources.

     

    3.2.6  Changes.
      Prevent AMEDISYS employees from changing the Outcomes Assessment Information
      Set
(AOASIS@)
      data on
      an edited assessment after it has been submitted to the state.

     

    3.2.7  Cooperation.
      Cooperate with AMEDISYS MIS personnel to make the process of transferring
      assessment data files between HQS and AMEDISYS an automated, unattended
      process.

     

    3.2.8  Timely
      Support. Maintain a support staff that, during HQS published hours of support,
      will provide responses to AMEDISYS support calls within 2 hours of receiving
      the
      call if the user identifies the issue as business critical as defined in the
      HQS
      Support Policy.

     

    3.2.9  Documentary
      Support. Provide AMEDISYS written documentation and operating instructions
      on
      software updates and modifications as provided to all HQS
      customers.

     

    3.2.10  Advise
      of
      Outages. Advise AMEDISYS MIS department of any planned or unplanned system
      outages in a timely manner, not to exceed 1 hour after HQS gains knowledge
      of
      the event.

     

    3.2.11  Access
      Rolls. Provide AMEDISYS with online access to information that identifies
      AMEDISYS employees who are Authorized to use and/or access the HQS
      system.

     

    3.2.12  Financial
      Reporting. Provide AMEDISYS with quarterly financial information, including
      a
      balance sheet, and income statement, and a statement of cash flows.

     

    4.     
       FEES

     

    4.2.  Base
      Charges.
      Except
      as
      set forth below with respect to additional compensation for additional services,
      AMEDISYS shall pay HQS for the Service provided under this Agreement and the
      Service Exhibits at the rates and under the terms set forth in Service Exhibit
      A. The rates set forth in Service Exhibit A may be changed by HQS from
      time-to-time as defined in the Exhibits or for any extension of the term of
      this
      Agreement (as provided in Section 5.1 below) upon delivery of notice of the
      changes to such rates at least thirty (30) days’ before the changes become
      effective, The extension of the term of this Agreement (as provided in Section
      5.1. below) following delivery of such notice of changes to the rates shall
      constitute AMEDISYS agreement to such changes.

     

    
      
        
        

      

      
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    4.3.  Additional
      Services Compensation In the event that AMEDISYS orders and receives additional
      services in connection with education or the Help Desk as defined in the HQS
      Customer Support Policy AMEDISYS shall pay HQS for such services at the rates
      specified in Service Exhibit A.

     

    4.4.  Other
      Costs.
      The
      rates set forth in the HQS Data Services Pricing Schedule do not include, and
      AMEDISYS shall be responsible and pay for, (a) the Equipment necessary for
      AMEDISYS to access and use the Service; (b) communication charges, access fees,
      levies, tariffs and other costs, expenses or charges associated with accessing
      the Service; and (c) installation and testing of any (i) communication lines,
      links or interfaces; or (ii) equipment or other services used by AMEDISYS in
      connection with the Service.

     

    4.5.  AMEDISYS
      shall pay each bill no later than thirty (30) business days after receipt of
      HQS
      invoice. HQS shall have the option in HQS sole discretion to impose a late
      charge of 1-3%
      per
      month on all amounts overdue, except that imposition of such charge shall not
      forgive or waive any breach or the obligation of AMEDISYS to pay amounts billed
      within the time originally required.

     

    4.6.  Taxes,
      In
      addition to the compensation and other costs set forth above, AMEDISYS shall
      be
      responsible to pay all government taxes or charges assessed by reason of or
      based upon the provision to AMEDISYS by HQS of services or goods under this
      Agreement and the costs of seeking any refund or abatement, including, without
      limitation any excise taxes or sales taxes and excluding ordinary personal
      property taxes assessed against or payable by HQS, taxes on HQS net income,
      and
      HQS corporate franchise taxes, HQS shall cooperate with AMEDISYS in pursuing
      any
      refund or abatement claims.

     

    5.     
      TERM
      AND TERMINATION

     

    5.2.  Term.
      The
      parties agree that as of the Effective Date AMEDISYS has committed to conduct
      a
      Pilot Test of the Service as described on the Sales Order attached hereto,
      During the Pilot Test period or on the completion of the Pilot Test AMEDISYS
      shall have the option of terminating the Service. Unless AMEDISYS notifies
      HQS
      of its intent to terminate the Service on the completion of the Pilot Test
      or
      unless terminated as provided in Sections 5.3 or 5.4 below, the term of this
      Agreement shall be a period of one (1) year, commencing on the Effective Date.
      The term shall be automatically extended for successive periods of one (1)
      year
      each, unless either party delivers written notice to the other party of its
      election not to extend the term of this Agreement (ANotice
      of
      Termination@)
      at least
      ninety (90) days before expiration of the then current term.

     

    5.3.  Termination
      Other Than At End of the Term.
      Either
      party may terminate this Agreement at any time by giving written Notice of
      Termination to the other party:

     

    
      	 	
              (a)

            	
              In
                the event that the other party defaults in performance of any material
                provision of this Agreement, and such default continues and is not
                cured
                to the notifying party’s satisfaction for a period of thirty (30) days
                after written notice to the defaulting party stating the specific
                default,
                except that said period of thirty (30) days shall be reduced to twenty
                (20) days in the event of any failure to pay HQS sums due under this
                Agreement;

            

    

     

    
      	 	
              (b)

            	
              In
                the event that any representation or warranty made by the other in
                this
                Agreement is false, incorrect, or misleading in any material
                respect;

            

    

     

    
      	 	
              (c)

            	
              In
                the event that the other party commits any material act of dishonesty,
                gross carelessness or gross misconduct in performance of this Agreement,
                even if the same would not otherwise constitute a breach of this
                Agreement; or

            

    

     

    
      	 	
              (d) 

            	
              In
                the event that voluntary or involuntary proceedings are commenced,
                for the
                winding up or dissolution of the other party, for the appointment
                of a
                receiver for the assets of the other party, for the assignment by
                the
                other party of its assets for the benefit of creditors, or for any
                action
                or relief taken or suffered by the other party as bankrupt or insolvent
                under any bankruptcy or insolvency
                laws.

            

    

     

    
      
        
        

      

      
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    5.4.  Termination
      by Agreement.
      We may
      mutually agree in writing to terminate this Agreement at any time.

     

    5.5.  Effect
      of Termination.
      Upon
      termination for any reason (other than as provided in 5.3):

     

    (a)
      AMEDISYS
      shall continue to be obligated to pay and shall pay to HQS all compensation
      otherwise payable in accordance with the terms of Section 4 for all services
      rendered by HQS prior to termination of the Agreement;

     

    (b)
      Each
      party shall return to the other the proprietary and confidential information
      of
      the other as required in Section 7 below;

     

    (c)
      HQS
      shall
      prohibit access to the service; and

     

    (d)
      The
      duties
      and obligations of the parties set forth in Sections 7, 9, 10.4, 10.6, 10.12,
      10.13,10.14, and 10.17 shall remain fully binding and in full force and
      effect.

     

    6.     
      SECURITY
      MEASURES AND PROCEDURES

     

    6.2.  Security
      Measures and Procedures Guide The
      parties shall follow the guidelines defined in Appendix 6.1, the HQS Security
      Measures and
      Procedures Guide, to keep communication of information between them
      secure.

     

    6.3.  Breach
      of Security.
      In the
      event of a breach of security or the threat of such a breach HQS retains the
      right to deny AMEDISYS or any Username access to the Service at any time without
      prior notice and the right to direct any Username to terminate access to the
      Service for any reason or no reason without prior notice, provided that HQS
      or
      the Service subsequently shall notify AMEDISYS within one (1) hour of this
      event
      by (i) telephone followed up by a communication in writing, or (ii) email or
      delivery of other written notice.

     

    The
      Authorized User shall not introduce or permit to be introduced into the Service
      any virus, worm, Trojan horse or other software routine, program or mechanism
      to
      permit unauthorized access into, to disable, to erase in whole or in part or
      in
      otherwise to adversely effect the Service, the HQS Software, the Equipment
      or
      any equipment maintained or used by HQS.

     

    6.4.  Internet
      Communication.
      The
      parties agree that the Security Measures and Procedures described above are
      reasonable under the circumstances and that each party shall cooperate
      reasonably in the other’s attempts to monitor and strengthen these protections.
      Both parties acknowledge that in light of the nature of Internet communication,
      unauthorized access to and loss or damage to hardware, software and data may
      occur despite the Security Measures and Procedures, Each party agrees that
      such
      access, loss or damage shall not be the responsibility of the other party and
      shall not create liability of the other party, if the other party has fully
      complied with and performed its responsibilities as set forth in the Security
      Measures and Procedures as defined in Appendix 6.1.

     

    6.5.  Service
      Internet Server.
      HQS and
      the Service shall not be responsible for any interception, access, loss,
      impairment, delay, corruption, or damage of any outbound code or data after
      the
      data leaves the back end of the Service Internet server or of any inbound code
      or data before the data enters the back end of the Service Internet server
      unless due to HQS’ negligence or a breach of any provision of this contract or
      any addendum or amendment thereof.

     

     

    
      
        
        

      

      
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    7.     
      CONFIDENTIAL
      INFORMATION

     

    7.2.  Confidential
      and Proprietary Information of AMEDISYS.
      HQS and
      the Service recognize that, due to the nature of this Agreement, HQS and the
      Service shall receive or have access to information from AMEDISYS that may
      be of
      a confidential or proprietary nature including, without limitation, financial
      records, patient medical and demographic data, and other information used by
      AMEDISYS for the operation of AMEDISYS business. HQS and the Service acknowledge
      and agree that AMEDISYS is entitled to prevent others from obtaining and
      utilizing AMEDISYS confidential and proprietary information. Therefore, except
      as otherwise expressly provided for herein, and except as directed by AMEDISYS,
      HQS agree to hold AMEDISYS confidential and proprietary information in
      confidence and not to disclose it or allow it to be disclosed, directly or
      indirectly, to any person or entity, except as may be reasonably necessary
      for
      purposes of this Agreement and then only if the recipient has agreed in writing
      to maintain the confidentiality of the information.

     

    7.3.  Compiled
      Information.
      AMEDISYS agrees that certain information submitted to HQS will be aggregated
      into the HQS national database of outcomes to be used exclusively for
      benchmarking purposes. Notwithstanding the obligations in Section 7.1, AMEDISYS
      agrees that the Service may, by removing, encoding, encrypting or otherwise
      concealing AMEDISYS personal identifiers, AMEDISYS personnel and AMEDISYS
      patients, de-identify AMEDISYS confidential and proprietary information,
      including without limitation, AMEDISYS business and financial records, patient
      medical and demographic data, utilization data, quality assurance data, outcomes
      data and other data reflecting the experience, condition and activities of
      AMEDISYS and AMEDISYS patients. AMEDISYS further agrees that the Service may
      incorporate AMEDISYS confidential and proprietary information in deidentified
      form into aggregations or compilations of technical, medical and business
      information, including but not limited to, statistical databases, data on payer
      billing rules, outcomes data, protocols and guidelines, financial analyses
      and
      generalized medical information (the ACompiled
      Information@).
      All
      de-identified information, once incorporated by the Service into Compiled
      Information shall become the property of HQS and shall no longer be subject
      to
      the restrictions of 7.1; and HQS may make
      changes to, develop, retain, use, transmit, disclose and dispose of it for
      any
      lawful purpose; provided that in each case of disclosure the Compiled
      Information shall not identify AMEDISYS, any personnel or any patient of
      AMEDISYS by name or other individual identifier, and the Service shall not
      disclose any key or other device to enable coded, encrypted or concealed
      identifying information to be disclosed or re-identified unless required by
      law,
      In the event that AMEDISYS’ information exceeds 33 1/3 percent of the total
      information reported, this section become null and void until such time as
      the
      percentage drops to below 33 1/3 percent.

     

    AMEDISYS
      shall not distribute or sublicense any Compiled Information.

     

    7.4.  Confidential
      and Proprietary Information of HQS.
      AMEDISYS recognizes that due to the nature of this Agreement, AMEDISYS shall
      receive or have access to information from HQS that is of a confidential and
      proprietary nature including, without limitation, price lists, procedure
      manuals, process diagrams, software, computer programs, formats and technology
      for organizing and presenting data, communication formats and other technology,
      and Compiled Information used by the Service for the operation of its business.
      AMEDISYS acknowledges and agrees that HQS and the Service are entitled to
      prevent HQS respective competitors and others from obtaining and utilizing
      the
      confidential and proprietary information. Therefore, except as directed by
      HQS
      and the Service, AMEDISYS agrees to hold all confidential and proprietary
      information in strictest confidence and not to disclose it or allow it to be
      disclosed, directly or indirectly, to any person or entity, except as may be
      reasonably necessary for purposes of this Agreement and then only if the
      recipient has agreed in writing to maintain the confidentiality of the
      information.

     

    7.5.  Additional
      Provisions.
      In the
      event that a party becomes legally compelled to disclose any information
      otherwise subject to confidentiality or use limitations of this Agreement,
      such
      party shall provide the other party with prompt notice so that such other
      parties may seek a protective order or other remedy. The party under a legal
      obligation to make a disclosure shall disclose only that information that has
      been approved for disclosure by that party’s legal counsel, The disclosing party
      shall cooperate with the nondisclosing party to obtain a protective order or
      other assurance that any recipient shall treat such proprietary information
      confidentially. The obligations in Sections 7.1 and 7.3 above shall not apply
      to
      information which (i) is or becomes generally available to and known by the
      public (other than as a result of an unpermitted disclosure directly or
      indirectly by the receiving party or its affiliates, advisors or
      representatives); (ii) is or becomes available to the receiving party on a
      non-confidential basis from a source other than the furnishing party or its
      affiliates, advisors or representatives, provided that such source is not and
      was not bound by a confidentiality agreement with or other obligation of secrecy
      to the furnishing party or any affiliate of which the receiving party has
      knowledge at the time of such disclosure; or (iii) has already been or is
      hereafter acquired or developed by the receiving party independently and without
      violating any confidentiality agreement or other obligation of secrecy. In
      keeping information confidential pursuant to this Agreement, each party shall
      be
      obligated to act in a manner no less protective than the care such party uses
      to
      protect its own similar confidential and proprietary information, except that
      in
      no event shall such care be less then reasonable. The provisions in this Section
      7 shall survive the termination of this Agreement and shall remain in full
      force
      and effect.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    7.6.  HIPAA
      COMPLIANCE.
      HQS
      acknowledges that the nature and practice of AMEDISYS’ business involves the use
      and maintenance of private and confidential medical records and other
      individually-identifiable health information, the storage, use, maintenance,
      and
      accessibility to which is and shall be governed by the privacy provisions of
      the
      Health Insurance Portability and Accountability Act (hereinafter referred to
      as
HIPAA.
      Neither
      HQS, it employees, agents, contractors, or assigns shall document, copy,
      disseminate, distribute, or otherwise disclose confidential medical records
      and/or other individually-identifiable health care information that each may
      have contact with, regardless of the nature, source, or medium of said
      confidential information, In the event that HQS and/or its employees, agents,
      contractors, or assigns are privy to any such confidential information, HQS
      covenants, warrants, and agrees that said party shall at all times maintain
      the
      confidentiality of any and all medical records and/or other
      individually-identifiable health care information to which said party may have
      access, and HQS shall ensure that any and all persons having any such access
      at
      HQS’ request or acquiescence, by its authority, or on its behalf shall strictly
      abide by the terms of this section, HQS further agrees to immediately notify
      AMEDISYS of any violation of this section or other compromise of private and
      confidential medical records and/or other individually-identifiable health
      information belonging to AMEDISYS or which HQS becomes aware. HQS also agrees
      to
      execute any additional confidentiality agreement(s) subsequently requested
      by
      AMEDISYS as required by the federal government under the privacy provisions
      of
      HIPAA.

     

    8.     
      WARRANTIES;
      LIMITATIONS

     

    8.2.  AMEDISYS
      acknowledges and agrees that the Service and the services provided thereunder
      involve complex computer hardware, software and Internet and other
      communications networks that are not necessarily free from defects or able
      to
      operate without interruption and that HQS does not warrant the same. HQS
      warrants to AMEDISYS on a continuing basis that the Service shall be available
      to AMEDISYS for a minimum of 99% of the scheduled uptime (as defined in HQS
      Customer Support Policy), but only in the absence of fault, negligence or breach
      of agreement by AMEDISYS or any other third party that causes or contributes
      to
      unavailability or impairment of the Service. THE SOLE AND EXCLUSIVE REMEDY
      FOR
      BREACH OF THIS WARRANTY SHALL BE AS SET FORTH IN
      SECTION
      8.2 BELOW. NOTWITHSTANDING THE FOREGOING, HQS DOES NOT WARRANT AND SHALL NOT
      BE
      RESPONSIBLE FOR UNAVAILABILITY OF THE SERVICE WHEN SUCH UNAVAILABILITY IS CAUSED
      BY (I) ACTS OR OMISSIONS OF ANY THIRD PARTIES, (II) FAILURE OF THIRD PARTY
      SYSTEMS OR EQUIPMENT OR (III) OTHER EVENTS BEYOND HQS COMMERCIALLY REASONABLE
      CONTROL. HQS DOES NOT WARRANT
      THAT THE
      SERVICE OR HQS SOFTWARE ARE FREE FROM ERRORS OR DEFECTS AND HEREBY DISCLAIM
      ANY
      AND ALL LIABILITIES ARISING THEREFROM.

     

    8.3.  As
      its
      sole and exclusive remedy for breach of warranty under Section 8.1 above and
      as
      its sole and exclusive remedy for failure of the Service in whole or in part
      to
      be substantially available to AMEDISYS, AMEDISYS agrees that if the breach
      of
      warranty or failure is caused solely by events within HQS’ commercially
      reasonable control, HQS shall credit AMEDISYS at the rate of 10% of AMEDISYS
      base charge amount for the affected month for every 1 % of Scheduled Uptime
      by
      which the availability of the substantial functionality of the Service in that
      month falls below 99% of Scheduled Uptime.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    8.4.  NOTWITHSTANDING
      ANYTHING TO THE CONTRARY HEREIN, HQS MAKES NO WARRANTIES, CONDITIONS, GUARANTIES
      OR REPRESENTATIONS AS TO THE MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
      OR OTHER WARRANTIES, CONDITIONS OR REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED,
      IN LAW OR IN FACT, ORAL OR IN WRITING, RELATING TO THE SERVICE OR HQS SOFTWARE.
      THE SERVICE IS MERELY A REPOSITORY OF INFORMATION PROVIDED BY OTHERS AND HQS
      MAKES NO REPRESENTATION OR WARRANTY AS TO THE TRUTH, ACCURACY, TIMELINESS OR
      COMPLETENESS OF ANY INFORMATION CONTAINED IN THE SERVICE AMEDISYS HEREBY
      ACKNOWLEDGE THAT AMEDISYS HAVES NOT RELIED UPON ANY WARRANTY, CONDITION,
      GUARANTY OR REPRESENTATION MADE BY US.

     

    8.5.  HQS
      SHALL
      NOT HAVE ANY LIABILITY TO AMEDISYS OR ANY USERNAME FOR: (i) ANY DAMAGES CAUSED
      BY OR ARISING OUT OF THE USE OF OR INABILITY TO USE THE SERVICE; OR (ii) ANY
      DAMAGES CAUSED BY OR ARISING OUT OF THE LOSS OR INACCURACY OF DATA OR PROGRAMS;
      OR (iii) NEGLIGENCE OR OTHERWISE WITH RESPECT TO ANY PERFORMANCE BY US PURSUANT
      TO THIS AGREEMENT. HQS SHALL NOT BE LIABLE IN ANY CIRCUMSTANCE TO AMEDISYS
      OR
      ANY USERNAME FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING
      WITHOUT LIMITATION, LOST PROFITS) EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
      DAMAGES. 

     

    8.6.  IN
      NO
      EVENT SHALL HQS’ AGGREGATE LIABILITY TO AMEDISYS OR ANY USERNAME (INCLUDING
      LIABILITY FOR ANY BREACH OF WARRANTY, NEGLIGENCE, STRICT Liability IN TORT,
      OR
      OTHERWISE, REGARDLESS OF FORM OF ACTION) EXCEED THE TOTAL CHARGES ACTUALLY
      PAID
      BY AMEDISYS TO HQS FOR THE SPECIFIC USE OF THE SERVICE BY AMEDISYS IN THE
      PRECEDING TWELVE (12) MONTHS.

     

    9.     
      INDEMNITY

     

    HQS
      will,
      at its own expense, indemnify and defend AMEDISYS in any action brought against
      AMEDISYS to the extent that such action is based on a claim that any aspect
      of
      the Service, or confidential and proprietary information of HQS defined in
      7.3,
      used within the scope of this Agreement, infringes any patents, copyrights,
      licenses or trade secrets of any third party, provided that HQS is immediately
      notified in writing of any such claim and provided further that HQS shall have
      the exclusive right to control such defense. In no event shall AMEDISYS settle
      any such claim, lawsuit or proceeding without HQS’ prior written approval. HQS
      shall pay all costs, damages and attorneys’ fees awarded against AMEDISYS in any
      such action attributable to an indemnified claim.

     

    HQS
      assumes no liability to AMEDISYS or to third parties with respect to the Service
      and the use of the Service in conjunction with the duties of AMEDISYS to obtain
      consents from patients and payers as necessary to permit HQS to perform the
      Service and to access and use the data as contemplated by this Agreement.
      AMEDISYS shall indemnify HQS against any losses incurred due to claims of
      third-party patients and/or payers against HQS involving the use of such data
      by
      HQS, and AMEDISYS shall pay all costs, damages and attorneys’ fees awarded
      against HQS in any such action attributable to an indemnified
      claim.

     

    HQS
      represents that it is the owner of the existing Service and supporting software
      and that it has the right to modify the same, to develop the Service, and to
      grant to AMEDISYS the use of the Service. AMEDISYS acknowledges the validity
      of
      HQS’ exclusive right, title, interest and ownership in and to the Service and
      supporting software and any registrations that have issued or may issue thereon,
      including the sole right to create derivative works thereof, and will not at
      any
      time do or cause to be done any act or thing contesting or in any way impairing
      or tending to impair part of such right, title, interest or ownership. AMEDISYS
      also acknowledges the value of HQS’ goodwill in the Service and supporting
      software, and acknowledges that the goodwill generated by AMEDISYS through
      use
      of the Service and supporting software inures to the sole benefit of HQS.
      AMEDISYS acknowledges that AMEDISYS will never acquire ownership rights in
      the
      Service and supporting software itself.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    10.    MISCELLANEOUS

     

    10.2.  Force
      Majeure.
      No
      failure, delay or default in performance of any obligation under this Agreement
      shall constitute an event of default or a breach of representation or warranty
      under this Agreement to the extent it is caused by a strike; fire; shortage
      of
      materials; legal act of a public authority; unavoidable casualty; civil
      disorder; riot; insurrection; vandalism; war; inclement weather; failure or
      error of any Internet access provider; failure or impairment of any lines of
      transmission belonging to any third party; failure or impairment of any
      third-party server, router, other equipment or software through which Internet
      transmissions occur; or, other extraordinary cause if such cause or condition
      is
      beyond the reasonable control and without the negligence of the party otherwise
      chargeable, for so long as such cause or condition continues and for a
      reasonable period of time thereafter, If a party intends to rely on the
      foregoing force majeure protection, it shall timely notify the other in order
      to
      permit the other in its sole discretion to suspend or curtail its own
      performance under the Agreement for such time as the failure, delay or default
      continues.

     

    10.3.  HQS
      Not Engaged in Delivery of Medical Care.
      The
      parties acknowledge and agree that HQS’ services shall in no way grant HQS any
      control or discretion over the medical methods, procedures or practices utilized
      by AMEDISYS or AMEDISYS clinicians or authorize HQS to interfere with the
      medical judgment of such clinicians. Nothing in this Agreement shall be
      construed to constitute HQS as engaging in the practice of medicine, delivery
      of
      medical care or as being responsible for any professional liability or other
      obligation of AMEDISYS or AMEDISYS clinicians. The parties agree that the
      exchange of medical information and patient data contemplated in this Agreement
      does not constitute the provision of medical care or give rise to any obligation
      to provide medical care.

     

    10.4.  Legislative,
      Regulatory or Administrative Change.
      In the
      event there shall be a development, change in or adoption of: (i) federal or
      state law, (ii) Medicare, Medicaid standards or regulations relating to the
      Healthcare Insurance Portability and Accountability Act (AHIPAA@),
      or
      other HIPAA standards, rules or procedures, (iii) state standards, rules or
      procedures, (iv) case law, (v) regulations or general instructions, (vi) the
      interpretation of any of the foregoing, or (vii) any third party reimbursement
      system, any of which appear to either party to be reasonably likely to
      materially and adversely affect the manner in which either party may perform
      or
      be compensated for its services under this Agreement or which shall make any
      portion of this Agreement unlawful, the parties shall immediately enter into
      good faith negotiations regarding the need for and terms of a new service
      arrangement and basis for compensation for the services furnished pursuant
      to
      this Agreement. Any such new service arrangement must comply with the relevant
      development, change, or adoption and must approximate as closely as possible
      the
      economic position of the parties in performance of this Agreement prior to
      the
      change.

     

    10.5.  Access
      to Records.
      Both
      during the term of this Agreement and after termination of this Agreement,
      the
      parties shall safeguard all records maintained by them pursuant to this
      Agreement for at least such periods as may be required by law. To the extent
      required by federal law, each party shall, upon proper request, allow the United
      States Department of Health and Human Services, the Comptroller General of
      the
      United States and their duly authorized representatives (collectively, the
      ~
      access to this Agreement and to all books, documents, files and records
      necessary to verify the nature and extent of the costs of services provided
      by
      either party under this Agreement, at any time during the term of the Agreement
      and for an additional period of seven (7) years following the last date services
      are furnished hereunder. If either party carries out any of its duties under
      this Agreement through an agreement between it and any person or entity, that
      party shall require that a clause be included in such agreement to the effect
      that until the expiration of seven (7) years after the furnishing of services,
      the person or entity shall make available upon request by the Federal
      Authorities all
      agreements,
      books, documents and records that are necessary to verify the nature and extent
      of the costs of services provided under that agreement.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    10.6.  Assignment.
      Except
      as may be herein specifically provided to the contrary, this Agreement shall
      inure to the benefit of and be binding upon the parties hereto and their
      respective legal representatives, successors and permitted assigns; provided,
      however, that neither party may assign this Agreement without the prior written
      consent of the other, which consent may not be unreasonably withheld, AMEDISYS
      acknowledges and agrees that HQS may subcontract to third parties performance
      of
      some or all of its duties and responsibilities under this Agreement after
      submitting, in writing, the name of such third parties, including information
      sufficient to judge the quality and character of such third party’s business
      activities.

     

    10.7.  Governing
      Law.
      This
      Agreement shall be governed by the laws of the State of Louisiana applicable
      to
      agreements to be performed wholly within that state, Unless agreed otherwise
      in
      writing by the parties hereto, the federal and the state courts in Louisiana,
      Louisiana shall be the exclusive venue for any litigation or other court
      proceeding between the parties that may arise out of, or be brought in
      connection with, or by reason of, this Agreement, Each party hereto hereby
      expressly agrees to submit to the personal jurisdiction and venue of such
      courts.

     

    10.8.  Recompensate.
      In the
      event of any litigation or controversy between the parties hereto arising out
      of
      or in connection with this Agreement, the prevailing party in such litigation
      or
      controversy shall be entitled to recover from the other party all reasonable
      attorneys’ fees, expense and suit costs, including those associated with any
      appellate proceedings and post-judgment collection proceedings.

     

    10.9.  Waiver.
      No
      failure by any party to insist upon the strict performance of any covenant,
      agreement, term or condition of this Agreement or to exercise any right or
      remedy hereunder shall constitute a waiver. No waiver of any breach shall affect
      or alter this Agreement, but each and every covenant, condition, agreement
      and
      term of this Agreement shall continue in full force and effect with respect
      to
      any other existing or subsequent breach.

     

    10.10.  Amendment.
      No
      amendment of this Agreement shall be effective unless in writing and executed
      by
      a duly authorized representative of each party.

     

    10.11.  Entire
      Agreement.
      This
      Agreement, together with any attachments hereto, constitutes the entire
      agreement between the parties relating to the subject matter hereof, and
      supersedes all prior agreements or understandings, whether explicit or implicit,
      which have been entered into before the execution hereof.

     

    10.12.  Notices.
      Any
      notice or other communication required or which may be given hereunder shall
      be
      in writing and shall be delivered personally, telexed or sent by facsimile,
      receipted on-line email or other electronic medium, or by United States mail
      or
      national overnight courier, postage prepaid, and shall be deemed given when
      so
      delivered personally, when received by facsimile, e-mail or other electronic
      medium, when delivered by overnight courier, the next day, or if mailed, three
      (3) days after the date of mailing, as follows:

    

      
        	
                If
                  to HQS:

              	
                If
                  to the Authorized User:

              
	
                Healthcare
                  Quality Solutions, Inc.

              	
                Amedisys,
                  Inc.

              
	
                200
                  South Hoover Boulevard

              	
                11100
                  Mead Road

              
	
                Building
                  205

              	
                Suite
                  300,

              
	
                Tampa
                  FL 33609

              	
                Baton
                  Rouge, LA 70816

              
	
                Attn:
                  Chief Financial Officer

              	
                Attn:
                  Chief Information Officer

              
	
                Fax:
                  813-282-8907

              	
                Fax:
                  225-295-9624

              

      

    

     

    Any
      party
      may change its address for notice purposes by written notice to the other party,
      certified mail return receipt requested and such change shall be effective
      upon
      receipt.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    10.13.  Invalidity.
      If any
      portion of this Agreement is held to be invalid or unenforceable, such
      invalidity or unenforceability shall not affect or impair the validity and
      enforceability of the remainder of this Agreement. In such event, all parties
      agree that the court making such determination shall have the power to alter
      or
      amend such provision so that it shall be enforceable consistent with the
      intention of the parties. The parties believe that this Agreement comports
      with
      all relevant laws and regulations. In the event that all or any portion of
      this
      Agreement shall be found to be contrary to any law or regulation, and as a
      result is nullified or terminated by force of law, neither party shall be liable
      to the other by reason of such nullification or termination and HQS shall be
      entitled to receive payment for the fair value of the services HQS has
      provided.

     

    10.14.  Independent
      Contractors.
      Nothing
      in this Agreement shall affect the separate identity of either of the parties.
      In performing its obligations and accepting HQS’ services under this Agreement,
      it is mutually understood and agreed that at all times AMEDISYS and any
      clinicians who are practicing in association with AMEDISYS shall be acting
      and
      performing as independent parties, and are not as HQS employees or agents.
      Nothing contained in this Agreement shall be construed to create a joint
      venture, partnership, or like relationship between the parties, it being
      specifically agreed that their relationship is and shall remain that of
      independent parties to a contractual relationship as set forth in this
      Agreement. In no event shall either party be liable for the debts or obligations
      of the other party unless incurred due to the negligence of the other
      party.

     

    10.15.  Third
      Parties.
      None of
      the provisions of this Agreement shall be for the benefit of or enforceable
      by
      any creditors of any of the parties or by any patient or other third
      party.

     

    10.16.  Counterparts.
      This
      Agreement may be executed in any number of counterparts, with the same effect
      as
      if the signatures thereto and hereto were upon the same instrument, but all
      of
      such counterparts taken together shall be deemed to constitute one and the
      same
      instrument.

     

    10.17.  Headings
      and Titles.
      The
      headings appearing herein are for convenience and reference only and shall
      not
      be deemed to govern, limit, modify, or in any manner affect the scope, meaning,
      or intent of the provisions of this Agreement.

     

    10.18.  No
      Joint Obligations.
      The
      obligations and liabilities of each party under the terms of this Agreement
      shall be several, each party being responsible only for its respective
      obligations hereunder.

     

    IN
      WITNESS OF, the parties hereto have executed this Agreement to be effective
      as
      of the date first written above.

     

    
      	 HEALTHCARE QUALITY SOLUTIONS,
              INC.	 	 	 AMEDISYS,
              INC.
	 	 	 	 
	 	 	 	 
	By: 
              /s/ B.M. Milvain	 	
               By:

            	/s/ Larry
              Graham
	
              
                

              

            	 	 	
              

            
	Name: Brian Milvain	 	 	Name: Larry Graham
	Title: President	 	 	Title: COO
	
              Date:
                2/25/03

            	 	 	
              Date:
                2/26/03

            

    

     

    
      
        
        

      

      
        12THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
      LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
      MAY
      NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
      EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
      APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO AMERICAN TECHNOLOGIES GROUP, INC. THAT SUCH REGISTRATION IS
      NOT
      REQUIRED.

     

    AMENDED
      AND RESTATED

    SECURED
      CONVERTIBLE MINIMUM BORROWING NOTE

     

    FOR
      VALUE
      RECEIVED, each of AMERICAN TECHNOLOGIES GROUP, INC., a Nevada corporation (the
      “Parent”),
      and
      the other companies listed on Exhibit
      A
      attached
      hereto (such other companies together with the Parent, each a “Company”
and
      collectively, the “Companies”),
      jointly and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
      Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
      George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”)
      or its
      registered assigns or successors in interest, the sum of Three Million Dollars
      ($3,000,000), or, if different, the aggregate principal amount of all Loans
      (as
      defined in the Security Agreement referred to below), together with any accrued
      and unpaid interest hereon, on September 6, 2008 (the “Maturity
      Date”)
      if not
      sooner paid.

     

    This
      Amended and Restated Secured Convertible Minimum Borrowing Note (this
“Note”)
      is
      intended to be a registered obligation within the meaning of Treasury Regulation
      Section 1.871-14(c)(1)(i) and each Company (or its agent) shall register this
      Note (and thereafter shall maintain such registration) as to both principal
      and
      any stated interest. Notwithstanding any document, instrument or agreement
      relating to this Note to the contrary, transfer of this Note (or the right
      to
      any payments of principal or stated interest thereunder) may only be effected
      by
      (i) surrender of this Note and either the reissuance by the Company of this
      Note
      to the new holder or the issuance by the Company of a new instrument to the
      new
      holder, or (ii) transfer through a book entry system maintained by the Company
      (or its agent), within the meaning of Treasury Regulation Section
      1.871-14(c)(1)(i)(B). 

     

    Capitalized
      terms used herein without definition shall have the meanings ascribed to such
      terms in that certain Amended and Restated Security Agreement dated as of
      January 31, 2007 by and among the Companies and the Holder (as amended,
      restated, modified and/or supplemented from time to time, the “Security
      Agreement”).

     

    The
      following terms shall apply to this Note:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      I

    CONTRACT
      RATE

     

    1.1  Contract
      Rate.
      Subject
      to Sections 4.2 and 5.10, interest payable on the outstanding principal amount
      of this Note (the “Principal
      Amount”)
      shall
      accrue at a rate per annum equal to the “prime rate” published in The
      Wall Street Journal
      from
      time to time (the “Prime
      Rate”),
      plus
      two percent (2%) (the “Contract
      Rate”).
      The
      Contract Rate shall be increased or decreased as the case may be for each
      increase or decrease in the Prime Rate in an amount equal to such increase
      or
      decrease in the Prime Rate; each change to be effective as of the day of the
      change in the Prime Rate. The Contract Rate shall not at any time be less than
      eight and one-quarter of one percent (8.25%). Interest shall be (i) calculated
      on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing
      on September 1, 2005 on the first business day of each consecutive calendar
      month thereafter through and including the Maturity Date and on the Maturity
      Date, whether by acceleration or otherwise.

     

    1.2  Contract
      Rate Adjustments and Payments.
      The
      Contract Rate shall be calculated on the last business day of each calendar
      month hereafter (other than for increases or decreases in the Prime Rate which
      shall be calculated and become effective in accordance with the terms of Section
      1.1) until the Maturity Date (each a “Determination
      Date”)
      and
      shall be subject to adjustment as set forth herein.

     

    ARTICLE
      II

    LOANS;
      PAYMENTS UNDER THIS NOTE

     

    2.1  Loans.
      All
      Revolving Loans evidenced by this Note shall be made in accordance with the
      terms and provisions of the Security Agreement.

     

    2.2  No
      Effective Registration.
      Notwithstanding anything to the contrary herein, the Holder shall not be
      required to accept shares of Common Stock as payment following a conversion
      by
      the Holder if there fails to exist an effective current Registration Statement
      (as defined in the Registration Rights Agreement) covering the shares of Common
      Stock to be issued, or if an Event of Default hereunder exists and is
      continuing, unless such requirement is otherwise waived in writing by the Holder
      in whole or in part at the Holder’s option.

     

    2.3  Optional
      Redemption in Cash.
      The
      Companies will have the option of prepaying this Note (“Optional
      Redemption”)
      by
      paying to the Holder a sum of money equal to one hundred twenty percent (120%)
      of the principal amount of this Note together with accrued but unpaid interest
      thereon and any and all other sums due, accrued or payable to the Holder arising
      under this Note, the Security Agreement, or any other Ancillary Agreement (the
      “Redemption
      Amount”)
      outstanding on the Redemption Payment Date (as defined below). The Parent shall
      deliver to the Holder a written notice of redemption (the “Notice
      of Redemption”)
      specifying the date for such Optional Redemption (the “Redemption
      Payment Date”),
      which
      date shall be seven (7) days after the date of the Notice of Redemption (the
      “Redemption
      Period”).
      A
      Notice of Redemption shall not be effective with respect to any portion of
      this
      Note for which the Holder has previously delivered a Notice of Conversion
      (defined below) pursuant to Section 3.1, or for conversions elected to be made
      by the Holder pursuant to Section 3.1 during the Redemption Period. The
      Redemption Amount shall be determined as if such Holder’s conversion elections
      had been completed immediately prior to the date of the Notice of Redemption.
      On
      the Redemption Payment Date, the Redemption Amount (plus any additional interest
      and fees accruing on the Notes during the Redemption Period) must be irrevocably
      paid in full in immediately available funds to the Holder. In the event the
      Companies fail to pay the Redemption Amount on the Redemption Payment Date,
      then
      such Redemption Notice shall be null and void.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III

    CONVERSION
      RIGHTS AND FIXED CONVERSION PRICE

     

    3.1  Optional
      Conversion.
      Subject
      to the terms of this Article III, the Holder shall have the right, but not
      the
      obligation, at any time until the Maturity Date, or during an Event of Default
      (as defined in Article IV), and, subject to the limitations set forth in Section
      3.2 hereof, to convert all or any portion of the outstanding Principal Amount
      and/or accrued interest and fees due and payable into fully paid and
      nonassessable shares of the Common Stock at the Fixed Conversion Price. For
      purposes hereof, subject to Section 3.6 hereof, the initial “Fixed
      Conversion Price”
means
      $0.333. The shares of Common Stock to be issued upon such conversion are herein
      referred to as the “Conversion
      Shares.”

     

    3.2  Conversion
      Limitation.
      Notwithstanding anything contained herein to the contrary, the Holder shall
      not
      be entitled to convert pursuant to the terms of this Note an amount that would
      be convertible into that number of Conversion Shares which would exceed the
      difference between (i) 4.99% of the outstanding shares of Common Stock and
      (ii)
      the number of shares of Common Stock beneficially owned by the Holder. For
      purposes of the immediately preceding sentence, beneficial ownership shall
      be
      determined in accordance with Section 13(d) of the Exchange Act and Regulation
      13d-3 thereunder. The Conversion Shares limitation described in this Section
      3.2
      shall automatically become null and void following notice to any Company upon
      the occurrence and during the continuance of an Event of Default, or upon 75
      days prior notice to the Parent. Notwithstanding anything contained herein
      to
      the contrary, the provisions of this Section 3.2 are irrevocable and may not
      be
      waived by the Holder or any Company.

     

    3.3  Mechanics
      of Holder’s Conversion.
      In the
      event that the Holder elects to convert this Note into Common Stock of the
      Parent, the Holder shall give notice of such election by delivering an executed
      and completed notice of conversion in substantially the form of Exhibit
      A
      hereto
      (appropriately completed) (“Notice
      of Conversion”)
      to
      such Notice of Conversion shall provide a breakdown in reasonable detail of
      the
      Principal Amount, accrued interest and fees that are being converted. On each
      Conversion Date (as hereinafter defined) and in accordance with its Notice
      of
      Conversion, the Holder shall make the appropriate reduction to the Principal
      Amount, accrued interest and fees as entered in its records and shall provide
      written notice thereof to the Parent within two (2) Business Days after the
      Conversion Date. Each date on which a Notice of Conversion is delivered or
      telecopied to the Parent in accordance with the provisions hereof shall be
      deemed a Conversion Date (the “Conversion
      Date”).
      Pursuant to the terms of the Notice of Conversion, the Parent will issue
      instructions to the transfer agent accompanied by an opinion of counsel within
      one (1) Business Day of the date of the delivery to the Parent of the Notice
      of
      Conversion and shall cause the transfer agent to transmit the certificates
      representing the Conversion Shares to the Holder by crediting the account of
      the
      Holder’s designated broker with the Depository Trust Corporation (“DTC”)
      through its Deposit Withdrawal Agent Commission (“DWAC”)
      system
      within three (3) Business Days after receipt by the Parent of the Notice of
      Conversion (the “Delivery
      Date”).
      In
      the case of the exercise of the conversion rights set forth herein the
      conversion privilege shall be deemed to have been exercised and the Conversion
      Shares issuable upon such conversion shall be deemed to have been issued upon
      the date of receipt by the Parent of the Notice of Conversion. The Holder shall
      be treated for all purposes as the record holder of the Conversion Shares,
      unless the Holder provides the applicable Company written instructions to the
      contrary. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    3.4  Late
      Payments.
      Each
      Company understands that a delay in the delivery of the Conversion Shares in
      the
      form required pursuant to this Article beyond the Delivery Date could result
      in
      economic loss to the Holder. As compensation to the Holder for such loss, in
      addition to all other rights and remedies which the Holder may have under this
      Note, applicable law or otherwise, the Companies shall, jointly and severally,
      pay late payments to the Holder for any late issuance of Conversion Shares
      in
      the form required pursuant to this Article III upon conversion of this Note,
      in
      the amount equal to $500 per Business Day after the Delivery Date. The Companies
      shall, jointly and severally, make any payments incurred under this Section
      in
      immediately available funds upon demand. 

     

    3.5  Conversion
      Mechanics.
      The
      number of shares of Common Stock to be issued upon each conversion of this
      Note
      shall be determined by dividing that portion of the principal and interest
      and
      fees to be converted, if any, by the then applicable Fixed Conversion
      Price.

     

    3.6  Adjustment
      Provisions.
      The
      Fixed Conversion Price and number and kind of shares or other securities to
      be
      issued upon conversion determined pursuant to Section 3.1 shall be subject
      to
      adjustment from time to time upon the occurrence of certain events during the
      period that this conversion right remains outstanding, as follows:

     

    (a)  Reclassification.
      If the
      Parent at any time shall, by reclassification or otherwise, change the Common
      Stock into the same or a different number of securities of any class or classes,
      this Note, as to the unpaid Principal Amount and accrued interest thereon,
      shall
      thereafter be deemed to evidence the right to purchase an adjusted number of
      such securities and kind of securities as would have been issuable as the result
      of such change with respect to the Common Stock (i) immediately prior to or
      (ii)
      immediately after such reclassification or other change at the sole election
      of
      the Holder.

     

    (b)  Stock
      Splits, Combinations and Dividends.
      If the
      shares of Common Stock are subdivided or combined into a greater or smaller
      number of shares of Common Stock, or if a dividend is paid on the Common Stock
      or any preferred stock issued by the Parent in shares of Common Stock, the
      Fixed
      Conversion Price shall be proportionately reduced in case of subdivision of
      shares or stock dividend or proportionately increased in the case of combination
      of shares, in each such case by the ratio which the total number of shares
      of
      Common Stock outstanding immediately after such event bears to the total number
      of shares of Common Stock outstanding immediately prior to such
      event.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    3.7  Reservation
      of Shares.
      During
      the period the conversion right exists, the Parent will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of Conversion Shares upon the full conversion of this Note,
      the
      Warrants and the Options. The Parent represents that upon issuance, the
      Conversion Shares will be duly and validly issued, fully paid and
      non-assessable. The Parent agrees that its issuance of this Note shall
      constitute full authority to its officers, agents, and transfer agents who
      are
      charged with the duty of executing and issuing stock certificates to execute
      and
      issue the necessary certificates for the Conversion Shares upon the conversion
      of this Note.

     

    3.8  Registration
      Rights.
      The
      Holder has been granted registration rights with respect to the Conversion
      Shares as set forth in a Registration Rights Agreement.

     

    3.9  Issuance
      of New Note.
      Upon
      any partial conversion of this Note, a new Note containing the same date and
      provisions of this Note shall, at the request of the Holder, be issued by the
      Companies to the Holder for the principal balance of this Note and interest
      which shall not have been converted or paid. Subject to the provisions of
      Article IV of this Note, the Companies shall not pay any costs, fees or any
      other consideration to the Holder for the production and issuance of a new
      Note.

     

    ARTICLE
      IV

    EVENTS
      OF DEFAULT AND DEFAULT RELATED PROVISIONS

     

    4.1  Events
      of Default.
      The
      occurrence of an Event of Default under the Security Agreement shall constitute
      an event of default (“Event
      of Default”)
      hereunder. 

     

    4.2  Default
      Interest.
      Following the occurrence and during the continuance of an Event of Default,
      the
      Companies shall, jointly and severally, pay additional interest on the
      outstanding principal balance of this Note in an amount equal to the Contract
      Rate plus ten percent (10%) per annum, and all outstanding Obligations,
      including unpaid interest, shall continue to accrue interest at such additional
      interest rate from the date of such Event of Default until the date such Event
      of Default is cured or waived.

     

    4.3  Default
      Payment.
      Following the occurrence and during the continuance of an Event of Default,
      the
      Holder, at its option, may elect, in addition to all rights and remedies of
      the
      Holder under the Security Agreement and the Ancillary Agreements and all
      obligations of each Company under the Security Agreement and the Ancillary
      Agreements, to require the Companies, jointly and severally, to make a Default
      Payment (“Default
      Payment”).
      The
      Default Payment shall be 130% of the outstanding principal amount of the Note,
      plus accrued but unpaid interest, all other fees then remaining unpaid, and
      all
      other amounts payable hereunder. The Default Payment shall be applied first
      to
      any fees due and payable to the Holder pursuant to the Notes and/or the
      Ancillary Agreements, then to accrued and unpaid interest due on the Notes,
      the
      Security Agreement and then to the outstanding principal balance of the Notes.
      The Default Payment shall be due and payable immediately on the date that the
      Holder has exercised its rights pursuant to this Section 4.3.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1  Conversion
      Privileges.
      The
      conversion privileges set forth in Article III shall remain in full force and
      effect immediately from the date hereof until the date this Note is indefeasibly
      paid in full and irrevocably terminated.

     

    5.2  Cumulative
      Remedies.
      The
      remedies under this Note shall be cumulative.

     

    5.3  Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    5.4  Notices.
      Any
      notice herein required or permitted to be given shall be in writing and provided
      in accordance with the terms of the Security Agreement.

     

    5.5  Amendment
      Provision.
      The
      term “Note” and all references thereto, as used throughout this instrument,
      shall mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented, and any successor instrument
      as such successor instrument may be amended or supplemented.

     

    5.6  Assignability.
      This
      Note shall be binding upon each Company and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns, and
      may
      be assigned by the Holder in accordance with the requirements of the Security
      Agreement. No Company may assign any of its obligations under this Note without
      the prior written consent of the Holder, any such purported assignment without
      such consent being null and void.

     

    5.7  Cost
      of Collection.
      In case
      of any Event of Default under this Note, the Companies shall, jointly and
      severally, pay the Holder’s reasonable costs of collection, including reasonable
      attorneys’ fees.

     

    5.8  Governing
      Law, Jurisdiction and Waiver of Jury Trial.

     

    (a)  THIS
      NOTE
      SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAW.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b)  EACH
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND,
      AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY
      AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING
      OUT
      OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
      AGREEMENTS; PROVIDED,
      THAT
      EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
      HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK;
      AND FURTHER PROVIDED,
      THAT
      NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
      BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
      THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
      OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
      HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
      JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
      HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
      JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.
      EACH
      COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
      PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
      SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
      MAIL
      ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT
      AND
      THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
      ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
      POSTAGE PREPAID.

     

    (c)  EACH
      COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF
      THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR
      ANY
      COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY
      AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO
      OR
      THERETO.

     

    5.9  Severability.
      In the
      event that any provision of this Note is invalid or unenforceable under any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision of this Note.

     

    5.10  Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum rate permitted by such law, any payments in excess
      of such maximum rate shall be credited against amounts owed by the Companies
      to
      the Holder and thus refunded to the Companies.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    5.11  Security
      Interest.
      The
      Holder has been granted a security interest (i) in certain assets of the
      Companies as more fully described in the Security Agreement and (ii) pursuant
      to
      the Stock Pledge Agreement dated as of the date hereof. 

     

    5.12  Construction.
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against the
      other.

     

    5.13  Amendment
      and Restatement.
      This
      Note amends and restates in its entirety (and is given in substitution for
      but
      not in satisfaction of) that certain $3,000,000 Secured Convertible Minimum
      Borrowing Note dated as of September 7, 2005 executed by the Companies in favor
      of the Holder (the “Prior
      Note”).
      This
      Note does not effect a refinancing of all or any portion of the Obligations
      heretofore evidenced by the Prior Note, it being the intention of the Companies
      and the Holder to avoid effectuating a novation of such
      Obligations.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Company has caused this Amended and Restated Secured Convertible Minimum
      Borrowing Note to be signed in its name effective as of this 7th day of
      September, 2005.

     

    
      	 	 	 
	 	
              AMERICAN
                TECHNOLOGIES GROUP, INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title: 

    

     

    WITNESS:

    
       

      
        

      

    

     

    
      	 	 	 
	 	
              NORTH
                TEXAS STEEL COMPANY, INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title:

    

     

    
      WITNESS:

      
         

        
          

        

         

      

    

    
      	 	 	 
	 	
              OMAHA
                HOLDINGS CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title:

    

     

    
      
        WITNESS:

        
           

          
            

          

           

        

      

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    OTHER
      COMPANIES

     

    North
      Texas Steel Company, Inc., a Texas corporation

     

    Omaha
      Holdings Corp., a Delaware corporation

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

     

    NOTICE
      OF CONVERSION

     

    (To
      be
      executed by the Holder in order to convert the

    Secured
      Convertible Minimum Borrowing Note)

     

    The
      undersigned hereby elects to convert $_________ of the principal and $_________
      of the interest due on the Amended and Restated Secured Convertible Minimum
      Borrowing Note effective as of September 7, 2005 (the “Note”)
      issued
      by American Technologies Group, Inc. (the “Parent”)
      and
      the other Companies named and as defined therein into shares of Common Stock
      of
      the Parent (“Shares”)
      in
      accordance with the terms and conditions set forth in the Note, as of the date
      written below.

     

    
      	
              Date
                of Conversion:

            	 	_________________________________________________
	 	 	 
	
              Conversion
                Price:

            	 	_________________________________________________ 
	 	 	 
	
              Shares
                To Be Delivered:

            	 	_________________________________________________
	 	 	 
	
              Signature:

            	 	_________________________________________________
	 	 	 
	
              Print
                Name:

            	 	_________________________________________________
	 	 	 
	
              Address:

            	 	_________________________________________________
	 	 	 
	
              Holder
                DWAC instructions

            	 	_________________________________________________

    

     

    
      
        
        

      

      
        11

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