Document:

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                                                                   EXHIBIT 10.40

                                                                       No. N-___

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER SUCH ACT. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE
LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND/OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.

                         AMERICAN TECHNOLOGY CORPORATION
                     UNSECURED SUBORDINATED PROMISSORY NOTE

$                                                          San Diego, California
 -------------------                                           December 23, 2004

AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), for
value received hereby promises to pay to , or its assigns, the sum of ($ ), or
such lesser amount as shall then equal the outstanding principal amount hereof
and any unpaid accrued interest hereon, as set forth below, which shall all be
due and payable, unless earlier prepaid pursuant to the terms hereof, on the
earlier to occur of (i) December 31, 2006, or (ii) when declared due and payable
by the Holder upon the occurrence and during the continuance of an Event of
Default (as defined below) ("Maturity Date"). Payment for all amounts due
hereunder shall be made by mail to the registered address of the Holder as
defined below.

         This note ("Note") is one of a series of notes issued pursuant to the
Promissory Note and Warrant Purchase Agreement dated as of December 23, 2004 by
and between the Company and the purchasers described therein (the "Purchase
Agreement"), which notes are collectively referred to as the "Notes". Holder and
the Company agree that they shall be bound by all the terms, conditions and
provisions of the Purchase Agreement. Capitalized terms used, but not otherwise
defined herein, shall have the meaning given to such terms in the Purchase
Agreement.

         The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:

1. DEFINITIONS. As used in this Note, the following terms, unless the context
otherwise requires, have the following meanings:

         1.1 "Company" includes any corporation which shall succeed to or assume
the obligations of the Company under this Note.

                                      -1-
<PAGE>

         1.2 "Holder," when the context refers to a holder of this Note, shall
mean any person who shall at the time be the registered holder of this Note;
provided that any Holder shall be bound by the terms and conditions of this Note
and the Purchase Agreement.

2. INTEREST. The Company shall pay interest on the unpaid principal balance from
the Closing Date at the rate of eight percent (8%) per annum, or the maximum
rate permissible under the laws of the State of California relating to
permissible rates of interest for commercial loans, whichever is less (the
"Interest Rate"). Interest shall be calculated on the daily unpaid principal
balance hereof based on the actual number of days elapsed in the interest
payment period over a year of 365 days, or 366 days, as appropriate. Each
payment shall be credited first to interest then due, and the balance, if any,
to principal.

3. PAYMENT SCHEDULE. All payments under this Note must be made pro rata to the
holders of all Notes outstanding at the time of any such payment based on the
total principal and interest then due to each such Holder. Interest shall be due
and payable quarterly, in arrears, on or before the first day of each calendar
quarter, with the first interest payment due on or before April 1, 2005. This
Note may be prepaid in whole or in part from time to time without penalty after
June 30, 2005. In addition, unless the holders of a majority of the outstanding
principal balance under the Notes then held by Non-Affiliates agree otherwise,
the Company shall be required to use 40% of the net cash proceeds from each
Equity Financing (defined below) to prepay the Notes. For purposes of this Note,
"Equity Financing" shall mean a financing where capital stock or securities
convertible into capital stock of the Company are sold for cash proceeds by the
Company. The term "Equity Financing" shall not include: (a) any exercise of the
Warrants; (b) any exercise of other warrants of the Company outstanding on the
date of this Note; (c) any conversion of convertible securities of the Company
outstanding on the date hereof which pursuant to their terms may be converted or
exercised to Common Stock without payment of further cash consideration to the
Company; (d) the exercise of options, warrants or other Common Stock purchase
rights issued to employees, officers or directors of, or consultants or advisors
to, the Company or any subsidiary pursuant to stock purchase or stock option
plans, agreements or other arrangements that are approved by the Board of
Directors of the Company or the Compensation Committee thereof; (e) shares of
capital stock or securities convertible into capital stock of the Company issued
or issuable for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination approved by the Board
of Directors; (f) shares of capital stock or securities convertible into capital
stock of the Company issued or issuable pursuant to any equipment leasing
arrangement; (g) shares of capital stock or securities convertible into capital
stock of the Company issued or issuable pursuant to any debt financing from a
bank or similar financial institution approved by the Board of Directors; (h)
shares of capital stock or securities convertible into capital stock of the
Company issued or issuable with the approval of the Board of Directors to
customers or vendors of the Company or to persons with similar commercial
relationships with the Company; or (i) shares of capital stock or securities
convertible into capital stock of the Company issued or issuable pursuant to
corporate partnering transactions on terms approved by the Board of Directors.
If not otherwise prepaid, the outstanding principal amount hereof and any unpaid
accrued interest hereon shall be due and payable on the Maturity Date.

                                      -2-
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4. EVENTS OF DEFAULT. If any of the events specified in this SECTION 4 shall
occur (herein individually referred to as an "Event of Default"), the Holder of
the Note may, so long as such condition exists, declare the entire principal and
unpaid accrued interest hereon immediately due and payable, by notice in writing
to the Company:

         4.1 Default in the payment of the principal and unpaid accrued interest
of this Note when due and payable if such default is not cured by the Company
within thirty (30) days after the Holder has given the Company written notice of
such default; or

         4.2 The institution by the Company of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or
consent seeking reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company, or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company in furtherance of any such
action; or

         4.3 If, within ninety (90) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within ninety (90) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, such appointment shall not have been vacated.

5. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any Event
of Default and at any time thereafter during the continuance of such Event of
Default, Holder may declare all outstanding principal and accrued interest due
under this Note and payable by the Company hereunder to be immediately due and
payable in cash, by notice in writing to the Company.

6. SUBORDINATION. The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all the Company's Senior Indebtedness,
as hereinafter defined.

         6.1 SENIOR INDEBTEDNESS. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (i)
all indebtedness of the Company to banks, commercial finance lenders, insurance
companies or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company (whether or not
secured), and (ii) amounts owed to equipment lessors pursuant to equipment lease
lines approved by the Company's Board of Directors, and (iii) all indebtedness
of the Company evidenced by notes, debentures, bonds or other securities of the
Company which are designated by and approved by the Company's Board of
Directors, and (iv) all obligations and liabilities in connection with the lease
of real property, and (v) all modifications, renewals, extensions and refundings
of indebtedness, liabilities or obligations of the kind described in any of the
preceding clauses, provided, however no indebtedness of the Company, all or part

                                      -3-
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of which is convertible into equity, and no indebtedness which has a material
equity component shall be designated as Senior Indebtedness by the Company
without the consent of the holders of a majority of the outstanding principal
balance under the Notes then held by Non-Affiliates.

         6.2 DEFAULT ON SENIOR INDEBTEDNESS. If there should occur any
receivership insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangement with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshalling of the assets and
liabilities of the Company, or if this Note shall be declared due and payable
upon the occurrence of an Event of Default with respect to any Senior
Indebtedness, then (i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be satisfied, and (ii) no claim or proof of claim shall be filed with the
Company by or on behalf of the Holder of this Note that shall assert any right
to receive any payment in respect of the principal of and interest on this Note,
except subject to the satisfaction of the principal of and interest on all of
the Senior Indebtedness then outstanding. If there occurs an event of default
that has been declared in writing with respect to any Senior Indebtedness, or in
the instrument under which any Senior Indebtedness is outstanding, permitting
the holder of such Senior Indebtedness to accelerate the maturity thereof, then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or all Senior Indebtedness shall have been satisfied, no
payment shall be made in respect of the principal of or interest on this Note,
unless within three (3) months after the happening of such event of default, the
maturity of such Senior Indebtedness shall not have been accelerated.

         6.3 EFFECT OF SUBORDINATION. Subject to the rights, if any, of the
holders of Senior Indebtedness under this SECTION 6 to receive cash, securities
or other properties otherwise payable or deliverable to the Holder of this Note,
nothing contained in this SECTION 6 shall impair, as between the Company and the
Holder, the obligation of the Company, subject to the terms and conditions
hereof, to pay to the Holder the principal hereof and interest hereon as and
when the same become due and payable, or shall prevent the Holder of this Note,
upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.

         6.4 SUBROGATION. Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of SECTION 6.2 above) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of this Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the Holder would be
entitled except for the provisions of this SECTION 6 shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.

                                      -4-
<PAGE>

         6.5 UNDERTAKING. By its acceptance of this Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the holder of any Senior Indebtedness in order to
implement the foregoing provisions of this SECTION 6.

         6.6 PRO RATA DISTRIBUTION In the event that the Company's assets are
insufficient to satisfy the Holder of this Note and the holders of all other
Notes issued pursuant to the Purchase Agreement, the Company's available assets
shall be distributed pro rata to all such holders based on the total principal
and interest then due to each such holder.

7. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder agrees to be bound
by the terms and conditions, and makes the representations and warranties, in
the Purchase Agreement.

8. USURY. Holder acknowledges it has been advised by the Company that the
Company believes the Interest Rate payable herein is exempt from the usury
provisions of the General Corporations Law of the State of California ("GCLC"),
pursuant to Section 25118 of the California Corporations Code, provided,
however, the Company expressly disclaims any representation or warranty that the
Interest Rate payable in this Note is exempt from the usury provisions of the
GCLC under such section or is otherwise exempt from the usury provisions of
applicable California law.

9. ADDITIONAL RESTRICTIONS ON TRANSFER AND INTEREST EARNED. Registry books are
kept at the office of the Company. The transfer of this Note must be registered
on the registry of the Company. This Note must be surrendered for transfer at
the office or agency of the Company, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company, duly
executed by the Holder hereof or its attorney-in-fact, duly authorized in
writing. Thereafter, one or more new Notes, or authorized denominations, and for
the same aggregate principal amount, shall be issued to the designated
transferee or transferees. The parties intend that the interest earned under
this Note shall be "portfolio interest" of an "obligation in registered form"
for U.S. income tax purposes in accordance with IRC Sections 871(h) and 881(c)
and Treasury Regulation Section 1.871-14.

10. ASSIGNMENT. Subject to the restrictions on transfer described herein, the
rights and obligations of the Company and the Holder of this Note shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.

11. EXPENSES; WAIVERS. In the event that any dispute among the parties to this
Note should result in litigation, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this Note,
including without limitation, such reasonable fees and expenses of attorney's
and accountants, which shall also include, without limitation, all fees, costs
and expenses of appeals. Except as otherwise set forth herein, the Company
hereby waives notice of default, presentation or demand for payment, protest or
notice of nonpayment or dishonor and all other notices or demands relative to
this Note.

                                      -5-
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12. WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the holders of a majority
of the face amount of all then outstanding Notes.

13. NOTICES. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
given in accordance with SECTION 7.8 of the Purchase Agreement.

14. GOVERNING LAW. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, excluding that body of law relating to conflict of
laws. 15. Heading; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be issued this 23rd day
of December 2004.

                                    AMERICAN TECHNOLOGY CORPORATION

                                    By:
                                           -------------------------------------

                                    Title:
                                           -------------------------------------

Acknowledged and Agreed:

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

By:
         --------------------------------------------

Title:
         --------------------------------------------

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

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

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                                                                   EXHIBIT 10.41

                                                                      No. W-N___

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.

                      WARRANT TO PURCHASE _________ SHARES
                               OF COMMON STOCK OF
                         AMERICAN TECHNOLOGY CORPORATION
                         (VOID AFTER DECEMBER 31, 2009)

         This certifies that _________________________________ or its assigns
(the "Holder"), for value received, is entitled to purchase from AMERICAN
TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), having a place
of business at 13114 Evening Creek Drive South, San Diego, California 92128, a
maximum of ______________(1) fully paid and nonassessable shares of the
Company's Common Stock ("Common Stock") for cash at a price of
________________________ (_____)(2) per share, as may be adjusted as provided
herein (the "Stock Purchase Price"), at any time or from time to time up to and
including 5:00 p.m. (Pacific time) on December 31, 2009 (the "Expiration Date"),
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.

         This warrant to purchase Common Stock (this "Warrant") is one of a
series of warrants issued pursuant to the Promissory Note and Warrant Purchase
Agreement dated as of December 23, 2004 (the "Purchase Agreement"), which
warrants are collectively referred to herein as the "Warrants."

         This Warrant is subject to the following terms and conditions:

1.       EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

                  1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares

----------
(1)      7,500 shares for every $100,000 principal of notes, prorated.

(2)      $9.26 per share if Holder is a director, officer, employee or
         consultant of the Company on the date hereof, and $8.60 per share
         otherwise.

                                      -1-
<PAGE>

of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within five (5) business days after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within five (5)
business days. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof and shall
be registered in the name of such Holder. Notwithstanding anything to the
contrary set forth above, each exercise of the Warrant shall cover at least the
lesser of (i) 7,500 shares of Common Stock (as adjusted for stock splits, stock
dividends, combinations and the like), or (ii) the total number of shares of
Common Stock then subject to the Warrant.

                  1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock  X = Y(A-B)
                                                      -----
                                                        A

         Where X = the number of shares of Common Stock to be issued to the
Holder

                                    Y = the number of shares of Common Stock
                                    purchasable under the Warrant or, if only a
                                    portion of the Warrant is being exercised,
                                    the portion of the Warrant being canceled
                                    (at the date of such calculation)

                                    A = the fair market value of one share of
                                    the Company's Common Stock (at the date of
                                    such calculation)

                                    B = Stock Purchase Price (as adjusted to the
                                    date of such calculation)

For purposes of the above calculation, fair market value of one share of Common
Stock shall be the volume weighted average price of the Company's Common Stock
from the hours of 9:30 a.m. to 4:00 p.m. on the Principal Market (defined below)

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<PAGE>

as reported by Bloomberg Financial using the AQR function for the five (5)
trading days immediately preceding the date of exercise for which there are
reported transactions in the Common Stock. Principal Market means the Nasdaq
National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.

                  2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, that the
Company shall not be required to effect a registration under Federal or State
securities laws with respect to such exercise other than as provided pursuant to
the Purchase Agreement. The Company will not take any action which would result
in any adjustment of the Stock Purchase Price (as set forth in Section 3 hereof)
if the total number of shares of Common Stock issuable after such action upon
exercise of all outstanding warrants, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon exercise of
all options and upon the conversion of all convertible securities then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.

                  3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES.
The Stock Purchase Price and the number of shares purchasable upon the exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.

                  3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.

                                      -3-
<PAGE>

                  3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

                           (a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,

                           (b) any cash paid or payable otherwise than as a cash
dividend, or

                           (c) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 3.1 above), then and
in each such case, the Holder hereof shall, upon the exercise of this Warrant,
be entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had he been the holder of record
of such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.

                  3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to or simultaneous with such Organic Change. In the event
of any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for

                                      -4-
<PAGE>

adjustments of the Stock Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company will not effect any such
consolidation, merger or sale unless, prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders of a
majority of the warrants to purchase Common Stock then outstanding, executed and
mailed or delivered to the registered Holder hereof at the last address of such
Holder appearing on the books of the Company, the obligation to deliver to such
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.

                  3.4 CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the foregoing
provisions of this Section 3 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of the
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.

                  3.5 NOTICES OF CHANGE.

                           (a) Within 10 business days after any adjustment in
the number or class of the shares subject to this Warrant and of the Stock
Purchase Price, the Company shall give written notice thereof to the Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.

                           (b) The Company shall give written notice to the
Holder at least 15 business days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions.

                           (c) The Company shall also give written notice to the
Holder at least 15 business days prior to the date on which an Organic Change
shall take place.

                  4. ISSUE TAX. The issuance of certificates for shares of
Common Stock upon the exercise of the Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, 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 that of the
then Holder of the Warrant being exercised.

                                      -5-
<PAGE>

                  5. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any warrant or of any shares of Common
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

                  6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Other than as set forth herein, nothing contained in this Warrant shall be
construed as conferring upon the Holder hereof the right to vote or to consent
or to receive notice as a shareholder of the Company or any other matters or any
rights whatsoever as a shareholder of the Company. No dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by any holder, 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 Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.

                  7. WARRANTS TRANSFERABLE. Subject to compliance with
applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

                  8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The
rights and obligations of the Company, of the holder of this Warrant and of the
holder of shares of Common Stock issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.

                  9. MODIFICATION AND WAIVER. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought;
provided, however, that any term of this Warrant may be amended with the written
consent of the Company and the holders of Warrants representing a majority in
interest of the shares of Common Stock then issuable upon exercise of the
Warrants issued pursuant to the Purchase Agreement that are then held by
Non-Affiliates (as defined in the Purchase Agreement), and any amendment so
effected shall be binding upon each holder of such Warrants.

                  10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.

                                      -6-
<PAGE>

                  11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be
binding upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the holder hereof.

                  12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.

                  13. LOST WARRANTS. The Company represents and warrants to the
Holder hereof that 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 receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

                  14. FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash equal
to such fraction multiplied by the then effective Stock Purchase Price.

                  15. LEGEND. The Holder understands and agrees that all
certificates evidencing the shares to be issued to the Holder may bear the
following legend:

                  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
                  THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
                  CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

                  16. SPECIFIC PERFORMANCE. The parties hereto hereby declare
that it is impossible to measure in money the damages which will accrue to a
party hereto or to their heirs, personal representatives, or assigns by reason
of a failure to perform any of the obligations under this Warrant and agree that
the terms of this Warrant shall be specifically enforceable. If any party hereto
or his heirs, personal representatives, or assigns institutes any action or
proceeding to specifically enforce the provisions hereof, any person against
whom such action or proceeding is brought hereby waives the claim or defense
therein that such party or such personal representative has an adequate remedy
at law, and such person shall not offer in any such action or proceeding the
claim or defense that such remedy at law exists.

                                      -7-
<PAGE>

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -8-
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 23rd day of December,
2004.

                                  AMERICAN TECHNOLOGY CORPORATION,
                                  a Delaware corporation

                                  By:
                                         ---------------------------------------

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

                                  Title:
                                         ---------------------------------------

                                      -9-
<PAGE>

                                    EXHIBIT A
                                SUBSCRIPTION FORM

                                                  Date: _________________, _____
American Technology Corporation
13114 Evening Creek Drive South
San Diego, California 92128
Attn: Chief Financial Officer

Ladies and Gentlemen:

         The undersigned hereby elects to exercise the warrant issued to it by
American Technology Corporation (the "Company") and dated December 23, 2004,
Warrant No. W-N___ (the "Warrant") and to purchase thereunder
___________________________ shares of the Common Stock of the Company (the
"Shares") at a purchase price of __________________ (________)(3) per Share for
an aggregate purchase price of _____________________ Dollars ($__________) (the
"Purchase Price").

         Pursuant to the terms of the Warrant the undersigned has (check one
that applies):

         [ ]      Delivered the aggregate Purchase Price herewith in full in
                  cash or by certified check or wire transfer; or

         [ ]      Elected to Net Issue Exercise as described in Section 1.2 of
                  the Warrant.

         The undersigned hereby reaffirms the representations and warranties
made in Section 4 of the Purchase Agreement as if made on the date hereof.

                                    Very truly yours,

                                    --------------------------------------------
                                    Signature

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

                                    Title:
                                           -------------------------------------

--------
(3)      $9.28 per share if Holder was a director, officer, employee or
         consultant of the Company, or an affiliate of such person, on the date
         of the Warrant, and $8.60 per share otherwise.

                                      -10-

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