Document:

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                                 Exhibit 4.1

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
     THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
     ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
     UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
     SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
     THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
     PURSUANT TO RULE 144 UNDER SAID ACT.

                            CONVERTIBLE DEBENTURE

Monrovia, California
January 14, 2000                                                   $___________

          FOR VALUE RECEIVED, AMERICAN TECHNOLOGIES GROUP, INC., a Nevada
corporation (hereinafter called the "BORROWER"), hereby promises to pay to
the order of _______________________________________ or registered assigns
(the "HOLDER") the sum of ______________________________ Dollars, on January
14, 2003 (the "MATURITY DATE"), and to pay interest on the unpaid principal
balance hereof at the rate of seven percent (7%) per annum from January 14,
2000 (the "ISSUE DATE") until the same becomes due and payable, whether at
maturity or upon acceleration or by prepayment or otherwise.  Any amount of
principal or interest on this Debenture which is not paid when due shall bear
interest at the rate of fifteen percent (15%) per annum from the due date
thereof until the same is paid ("DEFAULT INTEREST").  Interest shall commence
accruing on the issue date, shall be computed on the basis of a 365-day year
and the actual number of days elapsed and shall be payable at the time of
conversion of the principal to which such interest relates in accordance with
Article I below.  All payments due hereunder (to the extent not converted
into common stock, par value $0.001 per share, of the Borrower (the "COMMON
STOCK") in accordance with the terms hereof) shall be made in lawful money of
the United States of America. All payments shall be made at such address as
the Holder shall hereafter give to the Borrower by written notice made in
accordance with the provisions of this Debenture.  Whenever any amount
expressed to be due by the terms of this Debenture is due on any day which is
not a business day, the same shall instead be due on the next succeeding day
which is a business day and, in the case of any interest payment date which
is not the date on which this Debenture is paid in full, the extension of the
due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date.  As used in this Debenture, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are authorized or
required by law or executive order to remain closed.  Each capitalized term
used herein, and not otherwise defined, shall have the meaning ascribed

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thereto in that certain Securities Purchase Agreement, dated January14, 2000,
pursuant to which this Debenture was originally issued (the "PURCHASE
AGREEMENT").

     The following terms shall apply to this Debenture:

                        ARTICLE I.  CONVERSION RIGHTS

          1.1 CONVERSION RIGHT.

               The Holder shall have the right from time to time, and at any
time on or prior to the earlier of (i) the Maturity Date and (ii) the date of
payment of the Default Amount (as defined in Article III) pursuant to Section
1.6(a) or Article III, the Optional Prepayment Amount (as defined in Section
5.1) or any payments pursuant to Section 1.7, each in respect of the
remaining outstanding principal amount of this Debenture, to convert all or
any part of the outstanding and unpaid principal amount of this Debenture
into fully paid and non-assessable shares of Common Stock, as such Common
Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be
changed or reclassified at the conversion price  (the "CONVERSION PRICE")
determined as provided herein (a "CONVERSION"); PROVIDED, HOWEVER that in no
event shall the Holder be entitled to convert any portion of this Debenture
in excess of that portion of this Debenture upon conversion of which the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or the unexercised or unconverted portion of any other security of
the Borrower (including, without limitation, the warrants issued by the
Borrower pursuant to the Purchase Agreement) subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (2)
the number of shares of Common Stock issuable upon the conversion of the
portion of this Debenture with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Holder and
its affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso.  The
holder of this Warrant may waive the limitations set forth herein by written
notice to the Company.  The number of shares of Common Stock to be issued
upon each conversion of this Debenture shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion Price then
in effect on the date specified in the notice of conversion, in the form
attached hereto as Exhibit A (the "NOTICE OF CONVERSION"), delivered to the
Borrower by the Holder in accordance with Section 1.4 below; provided that
the Notice of Conversion is submitted by facsimile (or by other means
resulting in, or reasonably expected to result in, notice) to the Borrower or
its transfer agent before Midnight, New York City time on such conversion
date (the "CONVERSION DATE").  The term "CONVERSION AMOUNT" means, with
respect to any conversion of this Debenture, the sum of (1) the principal
amount of this Debenture to be converted in such conversion PLUS (2) accrued
and unpaid interest, if any, on such principal amount at the interest rates
provided in this Debenture to the Conversion Date PLUS (3) Default Interest,
if any, on the amounts referred to in the immediately preceding clauses (1)
and/or (2) PLUS (4) at the

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Holder's option, any amounts owed to the Holder pursuant to Sections 1.3 and
1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
Agreement, dated as of January 14, 2000, executed in connection with the
initial issuance of this Debenture and the other Debentures issued on the
Issue Date (the "REGISTRATION RIGHTS AGREEMENT").

          1.2 CONVERSION PRICE.

               (a) CALCULATION OF CONVERSION PRICE. The Conversion Price
shall be the lesser of (i) the Variable Conversion Price (as defined herein)
and (ii) the Fixed Conversion Price (as defined herein) (subject, in each
case, to equitable adjustments for stock splits, stock dividends or rights
offerings by the Borrower relating to the Borrower's securities or the
securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events).  The
"VARIABLE CONVERSION PRICE" shall mean the Applicable Percentage (as defined
herein) multiplied by the Market Price (as defined herein).  "MARKET PRICE"
means the average of the lowest three (3) Trading Prices (as defined below)
for the Common Stock during the ten Trading Day period ending one Trading Day
prior to the date the Conversion Notice is sent by the Holder to the Borrower
via facsimile (the "CONVERSION DATE").  "TRADING PRICE" means, for any
security as of any date, any price at which a sale of the Common Stock is
effected on the Over-the-Counter Bulletin Board (the "OTCBB") as reported by
Bloomberg Financial Markets or an equivalent, reliable reporting service
mutually acceptable to and hereafter designated by Holders of a majority in
interest of the Debentures and the Borrower ("BLOOMBERG") or, if the OTCBB is
not the principal trading market for such security, the trading price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.  "TRADING DAY" shall
mean any day on which the Common Stock is traded for any period on the OTCBB,
or on the principal securities exchange or other securities market on which
the Common Stock is then being traded. "APPLICABLE PERCENTAGE" shall mean
72.5%.  The "FIXED CONVERSION PRICE" shall mean $0.23.

               (b) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of
the Borrower or (ii) any person, group or entity (including the Borrower)
publicly announces a tender offer to purchase 50% or more of the Borrower's
Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"ANNOUNCEMENT DATE"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x) the
Conversion Price which would have been applicable for a Conversion occurring
on the Announcement Date and (y) the Conversion Price that would otherwise be
in effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in this Section 1.2(a).
For purposes hereof,  "ADJUSTED CONVERSION PRICE TERMINATION DATE" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above)
consummates or

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publicly announces the termination or abandonment of the proposed transaction
or tender offer (or takeover scheme) which caused this Section 1.2(b) to
become operative.

          1.3 AUTHORIZED SHARES.  The Borrower covenants that during the
period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement.  As of the date of issuance of this Debenture, a
sufficient number of authorized and unissued shares of Common Stock have been
duly reserved for issuance upon conversion of this Debenture and the other
Debentures issued pursuant to the Purchase Agreement (the "RESERVED AMOUNT").
The Reserved Amount shall be increased from time to time in accordance with
the Borrower's obligations pursuant to Section 4(h) of the Purchase
Agreement.  The Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable.  In addition, if the
Borrower shall issue any securities or make any change to its capital
structure which would change the number of shares of Common Stock into which
the Debentures shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for conversion of the outstanding
Debentures. The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Common Stock issuable upon
conversion of this Debenture and (ii) agrees that its issuance of this
Debenture shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock in accordance with the
terms and conditions of this Debenture.

           If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article I (a "CONVERSION DEFAULT"), subject to Section
4.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion.  The portion of this
Debenture which the Holder included in its Conversion Notice and which
exceeds the amount which is then convertible into available shares of Common
Stock (the "EXCESS AMOUNT") shall, notwithstanding anything to the contrary
contained herein, not be convertible into Common Stock in accordance with the
terms hereof until (and at the Holder's option at any time after) the date
additional shares of Common Stock are authorized by the Borrower to permit
such conversion, at which time the Conversion Price in respect thereof shall
be the lesser of (i) the Conversion Price on the Conversion Default Date (as
defined below) and (ii) the Conversion Price on the Conversion Date
thereafter elected by the Holder in respect thereof.  In addition, the
Borrower shall pay to the Holder payments ("CONVERSION DEFAULT PAYMENTS") for
a Conversion Default in the amount of (x) the SUM OF (1) the then
outstanding principal amount of this Debenture PLUS (2) accrued and unpaid
interest on the unpaid principal amount of this Debenture through the
Authorization Date (as defined below) PLUS (3) Default Interest, if any, on
the amounts referred to in clauses (1) and/or (2), MULTIPLIED BY (y) .24,
MULTIPLIED BY (z) (N/365), where N = the number of days from the day the
holder submits a Notice of Conversion giving rise to a Conversion Default
(the "CONVERSION DEFAULT DATE") to the date (the "AUTHORIZATION DATE") that
the Borrower authorizes a sufficient number of shares of Common Stock to
effect conversion of the full outstanding principal balance of this
Debenture.  The Borrower shall

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use its best efforts to authorize a sufficient number of shares of Common
Stock as soon as practicable following the earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower otherwise becomes aware
that there are or likely will be insufficient authorized and unissued shares
to allow full conversion thereof and (ii) a Conversion Default.  The Borrower
shall send notice to the Holder of the authorization of additional shares of
Common Stock, the Authorization Date and the amount of Holder's accrued
Conversion Default Payments.  The accrued Conversion Default Payments for
each calendar month shall be paid in cash or shall be convertible into Common
Stock (at such time as there are sufficient authorized shares of Common
Stock) at the applicable Conversion Price, at the Holder's option, as follows:

               (a) In the event Holder elects to take such payment in cash,
cash payment shall be made to Holder by the fifth day of the month following
the month in which it has accrued; and

               (b) In the event Holder elects to take such payment in Common
Stock, the Holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article I (so long as there is then a
sufficient number of authorized shares of Common Stock).

          The Holder's election shall be made in writing to the Borrower at
any time prior to 6:00 p.m., California time, on the third day of the month
following the month in which Conversion Default payments have accrued.  If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to
the extent in excess of the Conversion Default Payments) for the Borrower's
failure to maintain a sufficient number of authorized shares of Common Stock,
and each holder shall have the right to pursue all remedies available at law
or in equity (including degree of specific performance and/or injunctive
relief).

          1.4 METHOD OF CONVERSION.

              (a) MECHANICS OF CONVERSION.  Subject to Section 1.1,  this
Debenture may be converted by the Holder in whole or in part (provided such
partial conversion is at least $50,000, or such lesser amount as shall remain
unpaid at the time of the conversion (together with accrued and unpaid
interest thereon)) at any time from time to time after the Issue Date, by (A)
submitting to the Borrower a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date prior to
6:00 p.m., California time) and (B) subject to Section 1.4(b), surrendering
this Debenture at the principal office of the Borrower.

              (b) SURRENDER OF DEBENTURE UPON CONVERSION.  Notwithstanding
anything to the contrary set forth herein, upon conversion of this Debenture
in accordance with the terms hereof, the Holder shall not be required to
physically surrender this Debenture to the Borrower unless the entire unpaid
principal amount of this Debenture is so converted.  The Holder and the
Borrower shall maintain records showing the principal amount so converted and
the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Borrower,

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so as not to require physical surrender of this Debenture upon each such
conversion.  In the event of any dispute or discrepancy, such records of the
Borrower shall be controlling and determinative in the absence of manifest
error.  Notwithstanding the foregoing, if any portion of this Debenture is
converted as aforesaid, the Holder may not transfer this Debenture unless the
Holder first physically surrenders this Debenture to the Borrower, whereupon
the Borrower will forthwith issue and deliver upon the order of the Holder a
new Debenture of like tenor, registered as the Holder (upon payment by the
Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Debenture.  The
Holder and any assignee, by acceptance of this Debenture, acknowledge and
agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture represented by this Debenture may be less
than the amount stated on the face hereof.

               (c) PAYMENT OF TAXES. The Borrower shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property
on conversion of this Debenture in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or deliver
any such shares or other securities or property unless and until the person
or persons (other than the Holder or the custodian in whose street name such
shares are to be held for the Holder's account) requesting the issuance
thereof shall have paid to the Borrower the amount of any such tax or shall
have established to the satisfaction of the Borrower that such tax has been
paid.

               (d) DELIVERY OF COMMON STOCK UPON CONVERSION.  Upon receipt by
the Borrower from the Holder of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements
for conversion as provided in this Section 1.4, the Borrower shall issue and
deliver or cause to be issued and delivered to or upon the order of the
Holder certificates for the Common Stock issuable upon such conversion within
two (2) business days after such receipt (and, solely in the case of
conversion of the entire unpaid principal amount hereof, surrender of this
Debenture) (such second business day being hereinafter referred to as the
"DEADLINE") in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirements of
Section 2(g) of the Purchase Agreement that certificates for shares of Common
Stock issued on or after the effective date of the Registration Statement
upon conversion of this Debenture shall not bear any restrictive legend).

               (e) OBLIGATION OF BORROWER TO DELIVER COMMON STOCK.  Upon
receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed
to be the holder of record of the Common Stock issuable upon such conversion,
the outstanding principal amount and the amount of accrued and unpaid
interest on this Debenture shall be reduced to reflect such conversion, and,
unless the Borrower defaults on its obligations under this Article I, all
rights with respect to the portion of this Debenture being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such conversion.  If
the Holder shall have given a Notice of Conversion as provided herein, the
Borrower's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect
to any provision thereof, the recovery of any judgment against any person or
any action

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to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder of any obligation to the Borrower, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Borrower to the Holder in connection with such conversion.  The Conversion
Date specified in the Notice of Conversion shall be the Conversion Date so
long as the Notice of Conversion is received by the Borrower or its transfer
agent before 6:00 p.m., California time, on such date.

               (f) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER.  In lieu
of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower's transfer agent is participating in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and its compliance with the
provisions contained in Section 1.1 and in this Section 1.4, the Borrower
shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting
the account of Holder's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system.

               (g) FAILURE TO DELIVER COMMON STOCK PRIOR TO DEADLINE.
Without in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if
delivery of the Common Stock issuable upon conversion of this Debenture is
more than three (3) days after the Deadline (other than a failure due to the
circumstances described in Section 1.3 above, which failure shall be governed
by such Section) the Borrower shall pay to the Holder $2,000 per day in cash,
for each day beyond the Deadline that the Borrower fails to deliver such
Common Stock.  Such cash amount shall be paid to Holder by the fifth day of
the month following the month in which it has accrued or, at the option of
the Holder (by written notice to the Borrower by the first day of the month
following the month in which it has accrued), shall be added to the principal
amount of this Debenture, in which event interest shall accrue thereon in
accordance with the terms of this Debenture and such additional principal
amount shall be convertible into Common Stock in accordance with the terms of
this Debenture.

          1.5 CONCERNING THE SHARES.  The shares of Common Stock issuable
upon conversion of this Debenture may not be sold or transferred unless (i)
such shares are sold pursuant to an effective registration statement under
the Act or (ii) the Borrower or its transfer agent shall have been furnished
with an opinion of  counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (iii) such shares are sold
or transferred pursuant to Rule 144 under the Act (or a successor rule)
("RULE 144") or (iv) such shares are transferred to an "affiliate" (as
defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer
the shares only in accordance with this Section 1.5 and who is an Accredited
Investor (as defined in the Purchase Agreement).  Except as otherwise
provided in the Purchase Agreement (and subject to the removal provisions set
forth below), until such time as the shares of Common Stock issuable upon
conversion of this Debenture have been registered under the Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate
for shares of Common Stock issuable upon

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conversion of this Debenture that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend,
shall bear a legend substantially in the following form, as appropriate:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE
     SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
     OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
     SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
     CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
     REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT
     TO RULE 144 UNDER SAID ACT."

          The legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefor free of any transfer legend if
(i) the Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Common Stock may be made without registration under the Act and the shares
are so sold or transferred, (ii) such Holder provides the Borrower or its
transfer agent with reasonable assurances that the Common Stock issuable upon
conversion of this Debenture (to the extent such securities are deemed to
have been acquired on the same date) can be sold pursuant to Rule 144 or
(iii) in the case of the Common Stock issuable upon conversion of this
Debenture, such security is registered for sale by the Holder under an
effective registration statement filed under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold.  Nothing in this
Debenture shall (i) limit the Borrower's obligation under the Registration
Rights Agreement or (ii) affect in any way the Holder's obligations to comply
with applicable prospectus delivery requirements upon the resale of the
securities referred to herein.

          1.6 EFFECT OF CERTAIN EVENTS.

               (a) EFFECT OF MERGER, CONSOLIDATION, ETC.  At the option of
the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than 50% of the
voting power of the Borrower is disposed of, or the consolidation, merger or
other business combination of the Borrower with or into any other Person (as
defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant
to which the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount equal to the
Default Amount (as defined in Article III) or (ii) be treated pursuant to
Section 1.6(b) hereof.  "PERSON" shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or
organization.

               (b) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any
time when this Debenture is issued and outstanding and prior to conversion of
all of the Debentures, there

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shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Borrower shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Borrower or
another entity, or in case of any sale or conveyance of all or substantially
all of the assets of the Borrower other than in connection with a plan of
complete liquidation of the Borrower, then the Holder of this Debenture shall
thereafter have the right to receive upon conversion of this Debenture, upon
the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Holder of this
Debenture to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the
number of shares issuable upon conversion of the Debenture) shall thereafter
be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof.  The Borrower
shall not effect any transaction described in this Section 1.6(b) unless (a)
it first gives, to the extent practicable, thirty (30) days prior written
notice (but in any event at least fifteen (15) days prior written notice) of
the record date of the special meeting of stockholders to approve, or if
there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the Holder shall be
entitled to convert this Debenture) and (b) the resulting successor or
acquiring entity (if not the Borrower) assumes by written instrument the
obligations of this Section 1.6(b).  The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share
exchanges.

               (c) ADJUSTMENT DUE TO DISTRIBUTION.  If the Borrower shall
declare or make any distribution of its assets (or rights to acquire its
assets) to holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or distribution to the
Borrower's shareholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off)) (a "DISTRIBUTION"), then
the Holder of this Debenture shall be entitled, upon any conversion of this
Debenture after the date of record for determining shareholders entitled to
such Distribution, to receive the amount of such assets which would have been
payable to the Holder with respect to the shares of Common Stock issuable
upon such conversion had such Holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to
such Distribution.

               (d) PURCHASE RIGHTS.  If, at any time when any Debentures are
issued and outstanding, the Borrower issues any convertible securities or
rights to purchase stock, warrants, securities or other property (the
"PURCHASE RIGHTS") pro rata to the record holders of any class of Common
Stock, then the Holder of this Debenture will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this Debenture
(without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant,
issuance or sale of such

                                      -9-

<PAGE>

Purchase Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.

               (e) NOTICE OF ADJUSTMENTS.  Upon the occurrence of each
adjustment or readjustment of the Conversion Price as a result of the events
described in this Section 1.6, the Borrower, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to the Holder
of a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based.  The
Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the
Debenture.

          1.7 TRADING MARKET LIMITATIONS.  Unless permitted by the applicable
rules and regulations of the principal securities market on which the Common
Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement more than the maximum number of shares of Common Stock
that the Borrower can issue pursuant to any rule of the principal United
States securities market on which the Common Stock is then traded (the
"MAXIMUM SHARE AMOUNT"), which, as of the Issue Date shall be 7,313,178
shares (19.99% of the total shares outstanding on the Issue Date), subject to
equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the
Common Stock occurring after the date hereof.  Once the Maximum Share Amount
has been issued (the date of which is hereinafter referred to as the "MAXIMUM
CONVERSION DATE"), if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Borrower or any of its securities on the Borrower's ability to issue
shares of Common Stock in excess of the Maximum Share Amount (a "TRADING
MARKET PREPAYMENT EVENT"), in lieu of any further right to convert this
Debenture, and in full satisfaction of the Borrower's obligations under this
Debenture, the Borrower shall pay to the Holder, within fifteen (15) business
days of the Maximum Conversion Date (the "TRADING MARKET PREPAYMENT DATE"),
an amount equal to 130% TIMES the SUM of (a) the then outstanding principal
amount of this Debenture immediately following the Maximum Conversion Date,
PLUS (b) accrued and unpaid interest on the unpaid principal amount of this
Debenture to the Trading Market Prepayment Date, PLUS (c) Default Interest,
if any, on the amounts referred to in clause (a) and/or (b) above, PLUS (d)
any optional amounts that may be added thereto at the Maximum Conversion Date
by the Holder in accordance with the terms hereof (the then outstanding
principal amount of this Debenture immediately following the Maximum
Conversion Date, PLUS the amounts referred to in clauses (b), (c) and (d)
above shall collectively be referred to as the "REMAINING CONVERTIBLE
AMOUNT").  With respect to each Holder of Debentures, the Maximum Share
Amount shall refer to such Holder's PRO RATA share thereof determined in
accordance with Section 4.8 below.  In the event that the sum of (x) the
aggregate number of shares of Common Stock issued upon conversion of this
Debenture and the other Debentures issued pursuant to the Purchase Agreement
PLUS (y) the aggregate number of shares of Common Stock that remain issuable
upon conversion of this Debenture and the other Debentures issued pursuant to
the Purchase Agreement, represents at least one hundred percent (100%) of the
Maximum Share Amount (the "TRIGGERING EVENT"), the

                                     -10-

<PAGE>

Borrower will use its best efforts to seek and obtain Stockholder Approval
(or obtain such other relief as will allow conversions hereunder in excess of
the Maximum Share Amount) as soon as practicable following the Triggering
Event and before the Maximum Conversion Date.  As used herein, "STOCKHOLDER
APPROVAL" means approval by the stockholders of the Borrower to authorize the
issuance of the full number of shares of Common Stock which would be issuable
upon full conversion of the then outstanding Debentures but for the Maximum
Share Amount.

          1.8 STATUS AS STOCKHOLDER.   Upon submission of a Notice of
Conversion by a Holder, (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed
such Holder's allocated portion of the Reserved Amount or Maximum Share
Amount) shall be deemed converted into shares of Common Stock and (ii) the
Holder's rights as a Holder of such converted portion of this Debenture shall
cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the
Borrower to comply with the terms of this Debenture.  Notwithstanding the
foregoing, if a Holder has not received certificates for all shares of Common
Stock prior to the tenth (10th) business day after the expiration of the
Deadline with respect to a conversion of any portion of this Debenture for
any reason, then (unless the Holder otherwise elects to retain its status as
a holder of Common Stock by so notifying the Borrower) the Holder shall
regain the rights of a Holder of this Debenture with respect to such
unconverted portions of this Debenture and the Borrower shall, as soon as
practicable, return such unconverted Debenture to the holder or, if the
Debenture has not been surrendered, adjust its records to reflect that such
portion of this Debenture has not been converted.  In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation,
(i) the right to receive Conversion Default Payments pursuant to Section 1.3
to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with
respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower's failure to convert this Debenture.

                         ARTICLE II.  CERTAIN COVENANTS

          2.1 DISTRIBUTIONS ON CAPITAL STOCK.  So long as the Borrower shall
have any obligation under this Debenture, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other
securities) on shares of capital stock other than dividends on shares of
Common Stock solely in the form of additional shares of Common Stock or (b)
directly or indirectly or through any subsidiary make any other payment or
distribution in respect of its capital stock.

          2.2 RESTRICTION ON STOCK REPURCHASES.  So long as the Borrower
shall have any obligation under this Debenture, the Borrower shall not
without the Holder's written consent redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities or
otherwise) in any one transaction or series of related transactions any
shares of capital stock of the Borrower or any warrants, rights or options to
purchase or acquire any such shares; provided that the foregoing covenant
shall not apply to cashless exercises with respect to convertible securities
outstanding on the date hereof.

                                      -11-
<PAGE>

                       ARTICLE III.  EVENTS OF DEFAULT

     If any of the following events of default (each, an "EVENT OF DEFAULT")
shall occur:

     3.1   FAILURE TO PAY PRINCIPAL OR INTEREST.  The Borrower fails to pay
the principal hereof or interest thereon when due on this Debenture, whether
at maturity, upon mandatory prepayment pursuant to Section 1.7, upon
acceleration or otherwise.

     3.2   CONVERSION AND THE SHARES.  The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens that it will not honor
its obligation to do so) upon exercise by the Holder of the conversion rights
of the Holder in accordance with the terms of this Debenture (for a period of
at least sixty (60) days, if such failure is solely as a result of the
circumstances governed by Section 1.3 and the Borrower is using its best
efforts to authorize a sufficient number of shares of Common Stock as soon as
practicable), fails to transfer or cause its transfer agent to transfer
(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture or the Registration Rights Agreement, or fails to
remove any restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any shares of Common Stock issued
to the Holder upon conversion of this Debenture as and when required by this
Debenture or the Registration Rights Agreement (or makes any announcement,
statement or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue uncured (or
any announcement, statement or threat not to honor its obligations shall not
be rescinded in writing) for ten (10) days after the Borrower shall have been
notified thereof in writing by the Holder.

     3.3   FAILURE TO EFFECT REGISTRATION.  The Borrower fails to obtain
effectiveness with the Securities and Exchange Commission of the Registration
Statement prior to May 14, 2000 or such Registration Statement lapses in
effect (or sales cannot otherwise be made thereunder effective, whether by
reason of the Borrower's failure to amend or supplement the prospectus
included therein in accordance with the Registration Rights Agreement or
otherwise) for more than thirty (30) consecutive days or sixty (60) days in
any twelve month period after the Registration Statement becomes;

     3.4   BREACH OF COVENANTS.  The Borrower breaches any material covenant
or other material term or condition contained in Sections 1.3, 1.6 or 1.7 of
this Debenture, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after
written notice thereof to the Borrower from the Holder;

     3.5   BREACH OF REPRESENTATIONS AND WARRANTIES.  Any representation or
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
material adverse effect

                                   -12-
<PAGE>

on the rights of the Holder with respect to this Debenture, the Purchase
Agreement or the Registration Rights Agreement;

     3.6   RECEIVER OR TRUSTEE.  The Borrower or any subsidiary of the
Borrower shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business, or such a receiver or trustee
shall otherwise be appointed;

     3.7   JUDGMENTS.  Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $100,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

     3.8   BANKRUPTCY.  Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower; or

     3.9   DELISTING OF COMMON STOCK.  The Borrower shall fail to maintain
the listing of the Common Stock on at least one of the OTCBB, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or
the American Stock Exchange;

     3.10  DEFAULT UNDER OTHER DEBENTURES.  An Event of Default has occurred
and is continuing under any of the other Debentures issued pursuant to the
Purchase Agreement.

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the
option of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement exercisable
through the delivery of written notice to the Borrower by such Holders (the
"DEFAULT NOTICE"), and upon the occurrence of an Event of Default specified
in Section 3.6 or 3.8, the Debentures shall become immediately due and
payable and the Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the greater of (i) 130% TIMES the
SUM of (w) the then outstanding principal amount of this Debenture PLUS (x)
accrued and unpaid interest on the unpaid principal amount of this Debenture
to the date of payment (the "MANDATORY PREPAYMENT DATE") PLUS (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or (x) PLUS
(z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof
or pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Debenture to the date of payment PLUS
the amounts referred to in clauses (x), (y) and (z) shall collectively be
known as the "DEFAULT SUM") or (ii) the "parity value" of the Default Sum to
be prepaid, where parity value means (a) the highest number of shares of
Common Stock issuable upon conversion of such Default Sum in accordance with
Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the "Conversion Date" for purposes of determining the
lowest applicable Conversion Price, unless the Default Event arises as a
result of a breach in respect of a specific Conversion Date in which case
such Conversion Date shall be the Conversion Date), MULTIPLIED BY (b) the
highest Closing Price for the Common Stock during the period beginning

                                   -13-
<PAGE>

on the date of first occurrence of the Event of Default and ending one day
prior to the Mandatory Prepayment Date (the "DEFAULT AMOUNT") and all other
amounts payable hereunder shall immediately become due and payable, all
without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees
and expenses, of collection, and the Holder shall be entitled to exercise all
other rights and remedies available at law or in equity.

     If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares),
to require the Borrower, upon written notice, to immediately issue, in lieu
of the Default Amount, the number of shares of Common Stock of the Borrower
equal to the Default Amount divided by the Conversion Price then in effect.

                         ARTICLE IV.  MISCELLANEOUS

     4.1   FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part
of the Holder 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 privileges.  All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

     4.2   NOTICES.  Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by courier or
sent by United States mail and shall be deemed to have been given upon
receipt if personally served (which shall include telephone line facsimile
transmission) or sent by courier or three (3) days after being deposited in
the United States mail, certified, with postage pre-paid and properly
addressed, if sent by mail.  For the purposes hereof, the address of the
Holder shall be as shown on the records of the Borrower; and the address of
the Borrower shall be 1017 South Mountain Avenue, Monrovia, CA 91016,
facsimile number: 626-357-6551).  Both the Holder and the Borrower may change
the address for service by service of written notice to the other as herein
provided.

     4.3   AMENDMENTS.  This Debenture and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the Holder.
The term "Debenture" and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Debentures issued
pursuant to the Purchase Agreement) as originally executed, or if later
amended or supplemented, then as so amended or supplemented.

     4.4   ASSIGNABILITY.  This Debenture shall be binding upon the Borrower
and its successors and assigns, and shall inure to be the benefit of the
Holder and its successors and assigns.  Each transferee of this Debenture
must be an "accredited investor" (as defined in Rule 501(a) of the 1933 Act).
 Notwithstanding anything in this Debenture to the contrary, this Debenture
may be pledged as collateral in connection with a BONA FIDE margin account or
other lending arrangement.

                                   -14-
<PAGE>

     4.5   COST OF COLLECTION.  If default is made in the payment of this
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.

     4.6   GOVERNING LAW.  This Debenture shall be governed by the internal
laws of the State of California, without regard to the principles of conflict
of laws.  The Company hereby submits to the exclusive jurisdiction of the
United States Federal Courts located in Los Angeles, California with respect
t any dispute arising hereunder.  The party which does not prevail in any
dispute arising under this Debenture shall be responsible for all fees and
expenses, including attorneys' fees, incurred by the prevailing party in
connection with such dispute.

     4.7   CERTAIN AMOUNTS.  Whenever pursuant to this Debenture the Borrower
is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and
unpaid interest plus Default Interest on such interest, the Borrower and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to be
so paid by the Borrower represents stipulated damages and not a penalty and
is intended to compensate the Holder in part for loss of the opportunity to
convert this Debenture and to earn a return from the sale of shares of Common
Stock acquired upon conversion of this Debenture at a price in excess of the
price paid for such shares pursuant to this Debenture.  The Borrower and the
Holder hereby agree that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the receipt of a
cash payment without the opportunity to convert this Debenture into shares of
Common Stock.

     4.8   ALLOCATIONS OF MAXIMUM SHARE AMOUNT AND RESERVED AMOUNT.  The
Maximum Share Amount and Reserved Amount shall be allocated pro rata among
the holders of Debentures based on the principal amount of such Debentures
issued to each holder.  Each increase to the Maximum Share Amount and
Reserved Amount shall be allocated pro rata among the holders of Debentures
based on the principal amount of such Debentures held by each holder at the
time of the increase in the Maximum Share Amount or Reserved Amount. In the
event a holder shall sell or otherwise transfer any of such holder's
Debentures, each transferee shall be allocated a pro rata portion of such
transferor's Maximum Share Amount and Reserved Amount.  Any portion of the
Maximum Share Amount or Reserved Amount which remains allocated to any person
or entity which does not hold any Debentures shall be allocated to the
remaining holders of Debentures, pro rata based on the principal amount of
such Debentures then held by such holders.

     4.9   DAMAGES SHARES.  The shares of Common Stock that may be issuable
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to
Section 2(c) of the Registration Rights Agreement ("DAMAGES SHARES") shall
be treated as Common Stock issuable upon conversion of this Debenture for all
purposes hereof and shall be subject to all of the limitations and afforded
all of the rights of the other shares of Common Stock issuable hereunder,
including without limitation, the right to be included in the Registration
Statement filed pursuant to the Registration Rights Agreement. For purposes
of calculating interest payable on the outstanding principal amount hereof,
except as otherwise provided herein, amounts convertible into Damages Shares
("DAMAGES AMOUNTS") shall not bear interest but must be converted prior to
the conversion of any outstanding principal amount hereof, until the
outstanding Damages Amounts is zero.

                                   -15-
<PAGE>

     4.10   DENOMINATIONS.  At the request of the Holder, upon surrender of
this Debenture, the Borrower shall promptly issue new Debentures in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations of at least $100,000 as the Holder shall request.

     4.11   PURCHASE AGREEMENT.  By its acceptance of this Debenture, each
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

     4.12   NOTICE OF CORPORATE EVENTS.  Except as otherwise provided below,
the Holder of this Debenture shall have no rights as a Holder of Common Stock
unless and only to the extent that it converts this  Debenture into Common
Stock.  The Borrower shall provide the Holder with prior notification of any
meeting of the Borrower's shareholders (and copies of proxy materials and
other information sent to shareholders).  In the event of any taking by the
Borrower of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower
shall mail a notice to the Holder, at least twenty (20) days prior to the
record date specified therein (or thirty (30) days prior to the consummation
of the transaction or event, whichever is earlier), of the date on which any
such record is to be taken for the purpose of such dividend, distribution,
right or other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to the extent
known at such time.  The Borrower shall make a public announcement of any
event requiring notification to the Holder hereunder substantially
simultaneously with the notification to the Holder in accordance with the
terms of this Section 4.12.

                                   -16-
<PAGE>

                     ARTICLE V.  OPTIONAL PREPAYMENT

     5.1.   OPTIONAL PREPAYMENT.  Notwithstanding anything to the contrary
contained in this Article V, so long as (i) no Event of Default or Trading
Market Prepayment Event shall have occurred and be continuing, (ii) the
Registration Statement is then in effect and has been in effect and sales can
be made thereunder for at least twenty (20) days prior to the Optional
Prepayment Date (as defined below) and (iii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of  the Debentures, then at any time after the Issue Date, the
Borrower shall have the right, exercisable on not less than ten (10) Trading
Days prior written notice to the Holders of the Debentures (which notice may
not be sent to the holders of the Debentures until the Borrower is permitted
to prepay the Debentures pursuant to this Section 5.1), to prepay all of the
outstanding Debentures in accordance with this Section 5.1.  Any notice of
prepayment hereunder (an "OPTIONAL PREPAYMENT") shall be delivered to the
Holders of the Debentures at their registered addresses appearing on the
books and records of the Borrower and shall state (1) that the Borrower is
exercising its right to prepay all of the Debentures issued on the Issue Date
and (2) the date of prepayment (the "OPTIONAL PREPAYMENT NOTICE").  On the
date fixed for prepayment (the "OPTIONAL PREPAYMENT DATE"), the Borrower
shall make payment of the Optional Prepayment Amount (as defined below) to or
upon the order of the Holders as specified by the Holders in writing to the
Borrower at least one (1) business day prior to the Optional Prepayment Date.
 If the Borrower exercises its right to prepay the Debentures, the Borrower
shall make payment to the holders of an amount in cash (the "OPTIONAL
PREPAYMENT AMOUNT") equal to 130% multiplied by the sum of (w) the then
outstanding principal amount of this Debenture PLUS (x) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the Optional
Prepayment Date PLUS (y) Default Interest, if any, on the amounts referred to
in clauses (w) and (x) PLUS (z) any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of the
Registration Rights Agreement (the then outstanding principal amount of this
Debenture to the date of payment PLUS the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "OPTIONAL PREPAYMENT SUM").
Notwithstanding notice of an Optional Prepayment, the Holders shall at all
times prior to the Optional Prepayment Date maintain the right to convert all
or any portion of the Debentures in accordance with Article I and any portion
of Debentures so converted after receipt of an Optional Prepayment Notice and
prior to the Optional Prepayment Date set forth in such notice and payment of
the aggregate Optional Prepayment Amount shall be deducted from the principal
amount of Debentures which are otherwise subject to prepayment pursuant to
such notice.  If the Borrower delivers an Optional Prepayment Notice and
fails to pay the Optional Prepayment Amount due to the Holders of the
Debentures within two (2) business days following the Optional Prepayment
Date, the Borrower shall forever forfeit its right to redeem the Debentures
pursuant to this Section 5.1.

                                   -17-
<PAGE>

     IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this 14th day of January, 2000.

                                      AMERICAN TECHNOLOGIES GROUP, INC.

                                      By:
                                          ------------------------------------
                                          Lawrence J. Brady
                                          Chairman and Chief Executive Officer

                                   -18-

<PAGE>

                                                                      EXHIBIT A
                           NOTICE OF CONVERSION
                         OF CONVERTIBLE DEBENTURE

TO:     AMERICAN TECHNOLOGIES GROUP, INC.

          (1)   Pursuant to the terms of the attached Convertible Debenture
(the "DEBENTURE"), the undersigned hereby elects to convert $ __________
principal amount of the Debenture into shares of Common Stock of American
Technologies Group, Inc., a Nevada corporation (the "BORROWER").  Capitalized
terms used herein and not otherwise defined herein have the respective
meanings provided in the Debenture.

          (2)   The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the
undersigned or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DWAC TRANSFER").

     Name of DTC Prime Broker:
                               --------------------------------
     Account Number:
                     ------------------------------------------

/ /   In lieu of receiving shares of Common Stock issuable pursuant to this
      Notice of Conversion  by way of a DWAC Transfer, the undersigned hereby
      requests that the Borrower issue a certificate or certificates for the
      number of shares of Common Stock set forth above (which numbers are
      based on the Holder's calculation attached hereto) in the name(s)
      specified immediately below or, if additional space is necessary, on an
      attachment hereto:

      Name:
           -----------------------------------

      Address:
              --------------------------------

              --------------------------------

          (3)   Holder acknowledges and affirms that the Common Stock issued
pursuant to this Notice of Conversion has been or will be sold in accordance
with the requirements of the 1933 Act, if applicable, or pursuant to an
exemption under the 1933 Act.

Date:
       -------------------                  ------------------------------------
                                            Signature of Registered Holder
                                            (must be signed exactly as name
                                            appears in the Debenture, if
                                            applicable).<PAGE>

                                 Exhibit 4.2

     THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
     WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
     AS AMENDED.  EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A
     SECURITIES PURCHASE AGREEMENT DATED AS OF JANUARY __, 2000, NEITHER
     THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR
     ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
     SUCH SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
     SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
     TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
     UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

                                                                Right to
                                                                Purchase
                                                                500,000
                                                                Shares
                                                                of
                                                                Common
                                                                Stock,
                                                                par
                                                                value
                                                                $0.001
                                                                per share

                             STOCK PURCHASE WARRANT

     THIS CERTIFIES THAT, for value received, __________________, or its
registered assigns, is entitled to purchase from American Technologies Group,
Inc., a Nevada corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, Five Hundred Thousand
(500,000) fully paid and nonassessable shares of the Company's Common Stock,
par value $0.001 per share (the "Common Stock"), at an exercise price equal
to the lesser of (i) $__________ and (ii) the average of the lowest three (3)
Trading Prices (as defined below) during the ten (10) Trading Days (as
defined below) immediately prior to exercise (the "Exercise Price").  The
term "Trading Price" means any price at which a sale of the Common Stock is
effected on the Over-the-Counter Bulletin Board (the "OTC BB") as reported by
Bloomberg Financial Markets or an equivalent, reliable reporting service
mutually acceptable to and hereafter designated by holders of a majority in
interest of the Debentures and the Borrower ("Bloomberg") or, if the OTC BB
is not the principal trading market for such security, the trading price of
such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg. "Trading Day"
shall mean any day on which the Common Stock is traded for any period on the
OTC BB, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded.  The term "Warrant Shares," as
used herein, refers to the shares

<PAGE>

of Common Stock purchasable hereunder.  The Warrant Shares and the Exercise
Price are subject to adjustment as provided in Paragraph 4 hereof.  The term
"Warrants" means this Warrant and the other warrants issued pursuant to that
certain Securities Purchase Agreement, dated as of January 14, 2000, by and
among the Company and the Buyers listed on the execution page thereof,
including any warrants issuable pursuant to Section 4(I) thereof (the
"Securities Purchase Agreement").

     This Warrant is subject to the following terms, provisions, and
conditions:

     1.  MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with
a completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day
at the Company's principal executive offices (or such other office or agency
of the Company as it may designate by notice to the holder hereof), and upon
(i) payment to the Company in cash, by certified or official bank check or
by wire transfer for the account of the Company of the Exercise Price for the
Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), delivery to the Company of a written notice of an
election to effect a "Cashless Exercise" (as defined in Section 11(c) below)
for the Warrant Shares specified in the Exercise Agreement.  The Warrant
Shares so purchased shall be deemed to be issued to the holder hereof or such
holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares as set forth above.  Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three (3) business days, after this
Warrant shall have been so exercised.  The certificates so delivered shall be
in such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be
designated by such holder.  If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder
a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.

     Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares
of Common Stock which may be deemed beneficially owned through the ownership
of the unexercised Warrants and the unexercised or unconverted portion of any
other securities of the Company (including the Debentures (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analagous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being
made, would result in beneficial ownership by the holder and its affiliates
of more than 4.9% of the outstanding shares of Common Stock.  For purposes of
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with

                                   -2-
<PAGE>

Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13D-G thereunder, except as otherwise provided in clause (i) of
the preceding sentence.

     2.   PERIOD OF EXERCISE.  This Warrant is exercisable at any time or
from time to time on or after the date on which this Warrant is issued and
delivered pursuant to the terms of the Securities Purchase Agreement and
before 5:00 p.m., New York City time on the third (3rd) anniversary of the
date of issuance (the "Exercise Period").

     3.   CERTAIN AGREEMENTS OF THE COMPANY.   The Company hereby covenants
and agrees as follows:

          (a)   SHARES TO BE FULLY PAID.  All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued,
fully paid, and nonassessable and free from all taxes, liens, and charges
with respect to the issue thereof.

          (b)   RESERVATION OF SHARES.  During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.

          (c)   LISTING.  The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.

          (d)   CERTAIN ACTIONS PROHIBITED.  The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed by it hereunder, but will at
all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may reasonably be
requested by the holder of this Warrant in order to protect the exercise
privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant.  Without
limiting the generality of the foregoing, the Company (i) will not increase
the par value of any shares of Common Stock receivable upon the exercise of
this Warrant above the Exercise Price then in effect and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.

                                   -3-
<PAGE>

          (e)   SUCCESSORS AND ASSIGNS.  This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition
of all or substantially all the Company's assets.

     4.   ANTIDILUTION PROVISIONS.  During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from
time to time as provided in this Paragraph 4.

     In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded
up to the nearest cent.

          (a)  ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK.  Except as otherwise provided in Paragraphs 4(c)
and 4(e) hereof, if and whenever on or after the date of issuance of this
Warrant, the Company issues or sells, or in accordance with Paragraph 4(b)
hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Market Price (as hereinafter defined) on
the date of issuance (a "Dilutive Issuance"), then immediately upon the
Dilutive Issuance, the Exercise Price will be reduced to a price determined
by multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the
sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market
Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.

           (b)  EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS.  For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                (i)  ISSUANCE OF RIGHTS OR OPTIONS.  If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance or grant of such Options, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will, as of the
date of the issuance or grant of such Options, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.
For purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional

                                   -4-
<PAGE>

consideration payable upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the exercise
of all such Options (assuming full conversion of Convertible Securities, if
applicable).  No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Options or
upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

                (ii)  ISSUANCE OF CONVERTIBLE SECURITIES.  If the Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Market Price on
the date of issuance, then the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities
will, as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share.  For the purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of all
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities.
No further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.

                (iii)  CHANGE IN OPTION PRICE OR CONVERSION RATE.  If there
is a change at any time in (i) the amount of additional consideration payable
to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for
such changed additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold.

                (iv)  TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES.  If, in any case, the total number of shares of
Common Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights
to exercise such Option or to convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or termination
(other than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.

                                   -5-
<PAGE>

                (v)  CALCULATION OF CONSIDERATION RECEIVED.  If any Common
Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will
be the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection with such
issuance, grant or sale.  In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall
be other than cash, the amount of the consideration other than cash received
by the Company will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of
the date of receipt.  In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the amount
of consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.  The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Company.

                (vi)  EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE.  No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding
on the date of issuance of this Warrant; (ii) upon the grant or exercise of
any stock or options which may hereafter be granted or exercised under any
employee benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of the Company
or a majority of the members of a committee of independent directors
established for such purpose; (iii) upon the exercise of the Warrants; or
(iv) upon the issuance of securities pursuant to that certain Proposed Term
Sheet for a Structured Equity Line of Flexible Financing dated December 10,
1998.

                (c)  SUBDIVISION OR COMBINATION OF COMMON STOCK.  If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price
in effect immediately prior to such subdivision will be proportionately
reduced.  If the Company at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price
in effect immediately prior to such combination will be proportionately
increased.

                (d)  ADJUSTMENT IN NUMBER OF SHARES.  Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.

                                   -6-
<PAGE>

                (e)  CONSOLIDATION, MERGER OR SALE.   In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all
of the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or sale or conveyance, adequate provision will be made whereby the holder of
this Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place.  In any such
case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly
as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant.  The Company will not effect
any consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.

                (f)  DISTRIBUTION OF ASSETS.  In case the Company shall
declare or make any distribution of its assets (including cash) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise, then, after the date of record for determining stockholders
entitled to such distribution, but prior to the date of distribution, the
holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.

                (g)  NOTICE OF ADJUSTMENT.  Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment
and the increase or decrease in the number of Warrant Shares purchasable at
such price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.  Such
calculation shall be certified by the Chief Executive Officer of the Company.

                (h)  MINIMUM ADJUSTMENT OF EXERCISE PRICE.  No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than 1% of
such Exercise Price.

                (i)  NO FRACTIONAL SHARES.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.

                                   -7-
<PAGE>

                (j)  OTHER NOTICES.  In case at any time:

                     (i)   the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;

                     (ii)  the Company shall offer for subscription pro rata
to the holders of the Common Stock any additional shares of stock of any
class or other rights;

                     (iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets
to, another corporation or entity; or

                     (iv)  there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take
place.  Such notice shall also specify the date on which the holders of
Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be.  Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed
in respect thereto.  Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.

                (k)  CERTAIN EVENTS.  If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not
expressly provided for by such provisions, the Company will give notice of
such event as provided in Paragraph 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by
such event.

                                   -8-
<PAGE>

                (l)  CERTAIN DEFINITIONS.

                     (i)  "COMMON STOCK DEEMED OUTSTANDING" shall mean the
number of shares of Common Stock actually outstanding (not including shares
of Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or
grant of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof,
the maximum total number of shares of Common Stock issuable upon conversion
or exchange of Convertible Securities, as of the date of issuance of such
Convertible Securities, if any.

                     (ii)  "MARKET PRICE," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock on
the OTC BB for the five (5) trading days immediately preceding such date as
reported by Bloomberg, or (ii) if the OTC BB is not the principal trading
market for the shares of Common Stock, the average of the last reported sale
prices on the principal trading market for the Common Stock during the same
period as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price
shall be the fair market value as reasonably determined in good faith by (a)
the Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Warrants, by (b) an
independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the corporation. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in
respect of which a determination as to market value must be made hereunder.

                     (iii)  "COMMON STOCK," for purposes of this Paragraph 4,
includes the Common Stock, par value $0.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant
to this Warrant shall include only shares of Common Stock, par value $0.001
per share, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.

     5.   ISSUE TAX.  The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of this Warrant.

     6.   NO RIGHTS OR LIABILITIES AS A SHAREHOLDER.  This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company.  No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no
mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

                                   -9-
<PAGE>

     7.   TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

          (a)   RESTRICTION ON TRANSFER.  This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 7(f) hereof and to
the applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of January 14, 2000, by and among the Company and the other
signatories thereto (the "Registration Rights Agreement").

          (b)   WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.  This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Paragraph 7(e) below, for
new Warrants of like tenor representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the holder hereof at the time of
such surrender.

          (c)   REPLACEMENT OF WARRANT.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of any such mutilation, upon surrender
and cancellation of this Warrant, the Company, at its expense, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.

          (d)   CANCELLATION; PAYMENT OF EXPENSES.  Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company.  The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this Paragraph 7.

          (e)  REGISTER.  The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.

          (f)   EXERCISE OR TRANSFER WITHOUT REGISTRATION.  If, at the time
of the surrender of this Warrant in connection with any exercise, transfer,
or exchange of this Warrant, this Warrant (or, in the case of any exercise,
the Warrant Shares issuable hereunder), shall not be registered under

                                   -10-
<PAGE>

the Securities Act of 1933, as amended (the "Securities Act") and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under
the Securities Act.  The first holder of this Warrant, by taking and holding
the same, represents to the Company that such holder is acquiring this
Warrant for investment and not with a view to the distribution thereof.

     8.   REGISTRATION RIGHTS.  The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.

     9.   NOTICES.  All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this Warrant
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have been
furnished to the Company by notice from such holder.  All notices, requests,
and other communications required or permitted to be given or delivered
hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail or by recognized
overnight mail courier, postage prepaid and addressed, to the office of the
Company at 1017 South Mountain Avenue, Monrovia, California 91016, Attention:
Chief Executive Officer, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the Company.  Any such
notice, request, or other communication may be sent by facsimile, but shall
in such case be subsequently confirmed by a writing personally delivered or
sent by certified or registered mail or by recognized overnight mail courier
as provided above.  All notices, requests, and other communications shall be
deemed to have been given either at the time of the receipt thereof by the
person entitled to receive such notice at the address of such person for
purposes of this Paragraph 9, or, if mailed by registered or certified mail
or with a recognized overnight mail courier, upon deposit with the United
States Post Office or such overnight mail courier, if postage is prepaid and
the mailing is properly addressed, as the case may be.

     10.  GOVERNING LAW.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.  The Company
hereby submits to the exclusive jurisdiction of the United States Federal
Courts located in Los Angeles, California with respect to any dispute arising
hereunder.  The party which does not prevail in any dispute arising under
this Warrant shall be responsible for all fees and expenses, including
attorneys' fees, incurred by the prevailing party in connection with such
dispute.

                                   -11-
<PAGE>

     11.  MISCELLANEOUS.

          (a)  AMENDMENTS.  This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.

          (b)  DESCRIPTIVE HEADINGS.  The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

          (c)  CASHLESS EXERCISE.  Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder
is not then registered pursuant to an effective registration statement under
the Securities Act, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices
with a written notice of the holder's intention to effect a cashless
exercise, including a calculation of the number of shares of Common Stock to
be issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise").  In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price,  and the
denominator of which shall be the then current Market Price per share of
Common Stock.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                   -12-

<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                                      AMERICAN TECHNOLOGIES GROUP, INC.

                                      By:
                                           ------------------------------------
                                           Lawrence J. Brady
                                           Chairman and Chief Executive Officer

Dated as of January 14, 2000

                                   -13-

<PAGE>

                      FORM OF EXERCISE AGREEMENT

                                                     Dated:              , 200
                                                           -------------      -

To:    American Technologies Group, Inc.

       The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per
share provided by such Warrant in cash or by certified or official bank check
in the amount of, or, if the resale of such Common Stock by the undersigned
is not currently registered pursuant to an effective registration statement
under the Securities Act of 1933, as amended, by surrender of securities
issued by the Company (including a portion of the Warrant) having a market
value (in the case of a portion of this Warrant, determined in accordance
with Section 11(c) of the Warrant) equal to $_________.  Please issue a
certificate or certificates for such shares of Common Stock in the name of
and pay any cash for any fractional share to:

                                   Name:
                                              ------------------------------

                                   Signature:
                                              ------------------------------

                                   Address:
                                              ------------------------------

                                              ------------------------------

                                   Note:      The above signature should
                                              correspond exactly with the
                                              name on the face of the within
                                              Warrant, if applicable.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Wa rrant, a new Warrant is to be issued in the
name of said undersigned covering the balance of the shares purchasable
thereunder less any fraction of a share paid in cash.

<PAGE>

                           FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow,
to:

Name of Assignee                      Address                   No of Shares
----------------                      -------                   ------------

, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated:                  , 200
     -------------------     -

In the presence of:

-----------------------------------

                                   Name:
                                              ------------------------------

                                   Signature:
                                              ------------------------------

                                   Title of Signing Officer or Agent (if any):

                                              ------------------------------
                                   Address:
                                              ------------------------------

                                              ------------------------------

                                       Note:  The above signature should
                                              correspond exactly with the
                                              name on the face of the within
                                              Warrant, if applicable.

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