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<SEC-DOCUMENT>0001193125-03-020715.txt : 20030717
<SEC-HEADER>0001193125-03-020715.hdr.sgml : 20030717
<ACCEPTANCE-DATETIME>20030717164351
ACCESSION NUMBER:		0001193125-03-020715
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20030717
ITEM INFORMATION:		Other events
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20030717

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN TECHNOLOGY CORP /DE/
		CENTRAL INDEX KEY:			0000924383
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
		IRS NUMBER:				870361799
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24248
		FILM NUMBER:		03791597

	BUSINESS ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
		BUSINESS PHONE:		6196792114
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.txt
<DESCRIPTION>CURRENT REPORT
<TEXT>
<PAGE>

================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             FORM 8-K CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                Date of Report (Date of earliest event reported):
                          July 17, 2003 (May 30, 2003)

                         AMERICAN TECHNOLOGY CORPORATION
               (Exact Name of Registrant as Specified in Charter)

          Delaware                   0-24248                   87-0361799
          --------                   -------                   ----------
(State or Other Jurisdiction     (Commission File            (IRS Employer
      of Incorporation)               Number)              Identification No.)


13114 Evening Creek Drive South, San Diego, California            92128
- ------------------------------------------------------            -----
       (Address of Principal Executive Offices)                 (Zip Code)

                                 (858) 679-2114
                                 --------------
              (Registrant's telephone number, including area code)

================================================================================

<PAGE>


Item 5. Other Events and Regulation FD Disclosure

     A. Private Placement Completed.

     On July 11, 2003, American Technology Corporation (the "Company"), entered
into a Securities Purchase Agreement with certain institutional investors
pursuant to which the Company issued and sold 1,818,180 shares of its common
stock at a purchase price of $5.50 per share. In connection with such financing,
the Company also issued warrants to the investors to purchase 454,547 shares of
common stock with an exercise price of $6.75 per share. The warrants are
exercisable until July 10, 2007.

     The gross proceeds received from this financing were $10 million. Net
proceeds of the financing are expected to be used for working capital purposes
and to discharge the remaining $318,155 principal balance of the Company's 8%
Senior Secured Promissory Notes and accrued interest.

     These securities were offered and sold without registration under the
Securities Act of 1933 without registration under the Securities Act of 1933 to
a limited number of accredited investors in reliance upon the exemption provided
by Rule 506 of Regulation D thereunder, and may not be offered or sold in the
United States in the absence of an effective registration statement or exemption
from the registration requirements under the Securities Act. An appropriate
legend was placed on the shares and the warrants issued, and will be placed on
the shares issuable upon exercise of the warrants, unless registered under the
Securities Act prior to issuance. In connection with this financing, the Company
and the investors entered into a Registration Rights Agreement, pursuant to
which the Company agreed to prepare and file, within 30 days following the
issuance of the securities, a registration statement covering the resale of the
common stock sold and issuable upon the exercise of the warrants. The Company is
required to have such registration statement declared effective within 90 days
following the date of the issuance of the securities. The Company paid a
placement fee of 5% of the gross proceeds to Olympus Securities, LLC.

     A complete copy of each of the Securities Purchase Agreement, the Form of
Warrant, the Registration Rights Agreement and the related press release of the
Company, are filed herewith as Exhibits 4.1, 4.2, 4.3, and 99.1, respectively,
and are incorporated herein by reference. The summary of the transaction set
forth above is qualified in its entirety by reference to such exhibits.

     This Current Report on Form 8-K is neither an offer to sell nor a
solicitation of an offer to buy any of these securities. This portion of the
report is being filed pursuant to and in accordance with Rule 135c under the
Securities Act.

     B. Management Addition.

     On June 30, 2003 the Company announced the appointment of Mr. Carl Gruenler
as Vice President of Military Operations to oversee the Company's military
business. In such position, Mr. Gruenler will oversee the Company's military
business. Prior to joining the Company, Mr. Gruenler was in active duty, where
he managed the Navy's Smart Wing program to identify and develop new integrated
systems for physical security/access control, waterside force protection and
mobile computing. Prior to resuming active duty in May 1999, Mr. Gruenler was in
the Naval Reserves, and held a variety of management positions. From May 1993 to
April 1998, Mr. Gruenler served as president of Thomas D. Mangelsen Inc., a
national retail, manufacturing distribution company.

                                       2

<PAGE>

From February 1987 to April 1993, Mr. Gruenler served as chief financial officer
of Automated Monitoring and Control International Inc., a railroad systems
technology company. From January 1982 to January 1987, Mr. Gruenler was a
project manager/financial analyst at Union Pacific Railroad.

     In connection with the addition of Mr. Gruenler, Mr. Terry Conrad, formerly
Senior Vice President of Military Operations and of Engineering, has accepted
the newly created position of Director of Military Sales for the Western Region.
Mr. Conrad also has resigned from the Company's Board of Directors.


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

(a) Financial Statements of Business Acquired. None

(b) Pro Forma Financial Information. None

(c) Exhibits.

    4.1      Securities Purchase Agreement.

    4.2      Registration Rights Agreement.

    4.3      Form of Common Stock Warrant.

    99.1     Press Release dated July 17, 2003.

                                       3

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                            AMERICAN TECHNOLOGY CORPORATION


Date: July 17, 2003                         By:  /s/ RENEE WARDEN
                                               --------------------------------
                                                 Renee Warden
                                                 Chief Accounting Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>dex41.txt
<DESCRIPTION>SECURITIES PURCHASE AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT 4.1

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of July
11, 2003, among American Technology Corporation, a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers").

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:

                                   ARTICLE I.
                                  DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this
         -----------
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:

         "Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.

         "Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.

         "Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

         "Closing" means the closing of the purchase and sale of the Securities
pursuant to Section 2.

         "Closing Date" means the date of the Closing.

<PAGE>

         "Commission" means the Securities and Exchange Commission.

         "Common Stock" means the common stock of the Company, $.00001 par value
per share, and any securities into which such common stock may hereafter be
reclassified.

         "Common Stock Equivalents" means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.

         "Company Counsel" means Procopio, Cory, Hargreaves & Savitch LLP.

         "Effective Date" means the date that the Registration Statement
required by the Registration Rights Agreement is first declared effective by the
Commission.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Investment Amount" means, with respect to each Purchaser, the
investment amount indicated below such Purchaser's name on the signature page of
this Agreement.

         "Lien" means any lien, charge, encumbrance, security interest, right of
first refusal or other restrictions of any kind.

         "Per Unit Purchase Price" equals $5.50.

         "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

         "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

         "Purchaser Percentage" means, with respect to a Purchaser, the
percentage equal to the product of (x) a fraction, the numerator of which shall
be the Investment Amount paid by such Purchaser on the Closing Date and the
denominator of which shall be the aggregate Investment Amount paid by all
Purchasers on the Closing Date times (y) 100.

         "Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and the Warrant Shares.

                                       -2-


<PAGE>

         "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchasers, in the form of Exhibit B hereto.
                           ---------

         "Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "Securities" means the Shares, the Warrants and the Warrant Shares.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Shares" means the shares of Common Stock issued or issuable to the
Purchasers at the Closing pursuant to this Agreement.

         "Strategic Transaction" means a transaction or relationship in which
the Company issues shares of Common Stock or Common Stock Equivalents (i) to a
Person which is, itself or through its Subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising working capital or to an entity whose primary business is
investing in securities, or (ii) to a Person in connection with any equipment
lease or other asset-based lending transaction approved by the Company's Board
of Directors in accordance with reasonable business practices.

         "Subsidiary" means any subsidiary of the Company that is required to be
listed in Schedule 3.1(a).
          ---------------

         "Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.

         "Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market on which the Common Stock is listed or quoted for trading on the date in
question.

         "Transaction Documents" means this Agreement, the Warrants, the
Registration Rights Agreement, the Transfer Agent Instructions and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.

                                       -3-

<PAGE>

         "Transfer Agent Instructions" means the Company's Transfer Agent
Instructions in the form of Exhibit C.
                            ---------

         "Warrants" means the Common Stock purchase warrants, each in the form
of Exhibit A, which are issuable to the Purchasers at the Closing.
   ---------

         "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

     2.1 Closing. Subject to the terms and conditions set forth in this
         -------
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
the Shares and the Warrants representing such Purchaser's Investment Amount. The
Closing shall take place at the offices of Bryan Cave LLP, 1290 Avenue of the
Americas, New York, NY 10104 on the date this Agreement is executed and
delivered by the parties or at such other location or time as the parties may
agree.

     2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or
         ------------------
cause to be delivered to each Purchaser the following:

             (i)   a certificate evidencing a number of Shares equal to such
Purchaser's Investment Amount divided by the Per Unit Purchase Price, registered
in the name of such Purchaser;

             (ii)  a Warrant, registered in the name of such Purchaser, pursuant
to which such Purchaser shall have the right to acquire the number of shares of
Common Stock equal to 25% of the quotient obtained by dividing such Purchaser's
Investment Amount by the Per Unit Purchase Price;

             (iii) the legal opinion of Company Counsel, in agreed form,
addressed to the Purchasers;

             (iv)  the Registration Rights Agreement duly executed by the
Company; and

             (v)   the Transfer Agent Instructions executed by the Company and
delivered to and acknowledged by the Company's transfer agent.

         (b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:

                                       -4-

<PAGE>

             (i)  such Purchaser's Investment Amount, in United States dollars
and in immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and

             (ii) the Registration Rights Agreement duly executed by such
Purchaser.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby makes
         ---------------------------------------------
the following representations and warranties to each Purchaser:

         (a) Subsidiaries. The Company has no direct or indirect Subsidiaries
             ------------
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
                           ---------------                         --------
3.1(a), the Company owns, directly or indirectly, all of the capital stock of
- ------
each Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.

         (b) Organization and Qualification. Each of the Company and each
             ------------------------------
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, have
or reasonably be expected to result in (i) an adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) an adverse impairment to the Company's ability to perform on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a "Material Adverse Effect").

         (c) Authorization; Enforcement. The Company has the requisite corporate
             --------------------------
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will

                                       -5-

<PAGE>

constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.

         (d) No Conflicts. The execution, delivery and performance of the
             ------------
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.

         (e) Filings, Consents and Approvals. The Company is not required to
             -------------------------------
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements Registration Rights Agreement and
(ii) the application(s) to the Nasdaq Stock Market for the listing of the Shares
and Warrant Shares for trading thereon if required under the rules of the Nasdaq
Stock Market.

         (f) Issuance of the Securities. The Securities have been duly
             --------------------------
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants in order to issue the full number of Warrant
Shares as are or may become issuable in accordance with the Warrants.

         (g) Capitalization. The number of shares and type of all authorized,
             --------------
issued and outstanding capital stock of the Company is set forth in Schedule
                                                                    --------
3.1(g). Except as set forth in Schedule 3.1(g), no securities of the Company are
- ------                         ---------------
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities and except as
disclosed in Schedule 3.1(g), there are no outstanding options, warrants, scrip
             ---------------
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or

                                       -6-

<PAGE>

exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth in Schedule
                                                                 --------
3.1(g), the issue and sale of the Securities will not, immediately or with the
- ------
passage of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.

         (h) SEC Reports; Financial Statements. The Company has filed all
             ---------------------------------
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, or, in
the case of unaudited financial statements, as permitted by Rule 10-01 of
Regulation S-X promulgated under the Securities Act and the Exchange Act, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.

         (i) Press Releases. The press releases disseminated by the Company
             --------------
during the one (1) year preceding the date of this Agreement taken as a whole
(and in the context of other public disclosures by the Company available at the
time of each press release, including without limitation in the SEC Reports) do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

         (j) Material Changes. Since the date of the latest audited financial
             ----------------
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there

                                       -7-

<PAGE>

has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the identity of its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information.

         (k) Litigation. Except those matters disclosed in the Form 8-K filed by
             ----------
the Company with the Commission on May 28, 2003, there is no Action which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

         (l) Labor Relations. No material labor dispute exists or, to the
             ---------------
knowledge of the Company, is imminent with respect to any of the employees of
the Company.

         (m) Compliance. Neither the Company nor any Subsidiary (i) is in
             ----------
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

         (n) Regulatory Permits. The Company and the Subsidiaries possess all
             ------------------
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign

                                       -8-

<PAGE>

regulatory authorities necessary to conduct their respective businesses as
described in the SEC Reports, except where the failure to possess such permits
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.

         (o) Title to Assets. The Company and the Subsidiaries have good and
             ---------------
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.

         (p) Patents and Trademarks. The Company and the Subsidiaries have, or
             ----------------------
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.

         (q) Insurance. The Company and the Subsidiaries are insured by insurers
             ---------
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. The Company has no reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.

         (r) Transactions With Affiliates and Employees. Except as set forth in
             ------------------------------------------
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than as
holders of stock options and/or warrants, and for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

                                       -9-


<PAGE>

         (s) Internal Accounting Controls. The Company and the Subsidiaries
             ----------------------------
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

         (t) Solvency. Based on the financial condition of the Company giving
             --------
effect to the closing of the transactions contemplated herein: (i) the Company's
fair saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

         (u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage
             ------------                         --------------
or finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by a
Purchaser pursuant to written agreements executed by such Purchaser which fees
or commissions shall be the sole responsibility of such Purchaser) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.

         (v) Certain Registration Matters. Assuming the accuracy of the
             ----------------------------
Purchasers' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Shares and Warrant Shares by the Company to the Purchasers under the Transaction
Documents. The Company is eligible to register the resale of its Common Stock
for resale by the Purchasers under Form S-3 promulgated under the Securities
Act. Except as described in Schedule 3.1(v), the Company has not granted or
                            ---------------
agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority that have not been satisfied.

                                      -10-

<PAGE>

         (w) Listing and Maintenance Requirements. Except as to matters
             ------------------------------------
discussed in the Company's definitive proxy statement filed with the Commission
on August 22, 2002, the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from the Nasdaq SmallCap Market to the
effect that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the Nasdaq
SmallCap Market. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Nasdaq Stock Market and no approval
of the shareholders of the Company is required for the Company to issue and
deliver to the Purchasers the maximum number of Securities contemplated by
Transaction Documents.

         (x) Investment Company. The Company is not, and is not an Affiliate of,
             ------------------
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

         (y) Application of Takeover Protections. The Company has taken all
             -----------------------------------
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.

         (z) No Additional Agreements. The Company that does not have any
             ------------------------
agreement or understanding with any Purchaser with respect to the transactions
contemplated by the Transaction Documents other than as specified in this
Agreement.

         (aa) Disclosure. The Company confirms that neither it nor any Person
              ----------
acting on its behalf has provided any of the Purchasers or their agents or
counsel with any information that the Company believes constitutes material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company's
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser
         ------------------------------------------------
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:

                                      -11-

<PAGE>

         (a) Organization; Authority. Such Purchaser is an entity duly
             -----------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Purchaser is not a
corporation, such partnership, limited liability company or other applicable
like action, on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable against it
in accordance with its terms.

         (b) Investment Intent. Such Purchaser is acquiring the Securities as
             -----------------
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold the Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.

         (c) Purchaser Status. At the time such Purchaser was offered the
             ----------------
Securities, it was, and at the date hereof it is, and on each date on which it
exercises the Warrants it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.

         (d) General Solicitation. Such Purchaser is not purchasing the
             --------------------
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

         (e) Access to Information. Such Purchaser acknowledges that it has
             ---------------------
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to

                                      -12-

<PAGE>

rely on the truth, accuracy and completeness of the Disclosure Materials and the
Company's representations and warranties contained in the Transaction Documents.

         (f) No Prior Short Selling. At no time during the 30 days prior to the
             ----------------------
Closing Date has such Purchaser engaged in or effected, in any manner
whatsoever, directly or indirectly, in any "short sale" (as such term is defined
in Rule 3b-3 of the Exchange Act) of the Common Stock (a "Short Sale").

The Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.

         (b) Certificates evidencing the Securities will contain the following
legend, so long as is required by this Section 4.1(b):
                                       --------------

         [NEITHER] THESE SECURITIES [NOR THE SECURITIES ISSUABLE UPON EXERCISE
         OF THESE SECURITIES] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES
         AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
         RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
         OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
         BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
         STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
         EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
         STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
         THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
         REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
         SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED
         IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.

                                      -13-

<PAGE>

         The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin account and, if required under the
terms of such account, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such pledge or transfer would not be subject
to approval or consent of the Company and no legal opinion of legal counsel to
the pledgee, secured party or pledgor shall be required in connection with the
pledge, but the legend shall remain on the pledged Securities and such legal
opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder.

         (c) Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i) while
a registration statement (including the Registration Statement) covering the
resale of such Shares and Warrant Shares is effective under the Securities Act,
or (ii) following any sale of such Shares or Warrant Shares pursuant to Rule
144, or (iii) if such Shares or Warrant Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission). The Company shall cause its counsel to issue
the legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the Effective Date. Following the Effective Date or at such
earlier time as a legend is no longer required for the Shares and Warrant Shares
under this Section 4.1(c), the Company will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's transfer
agent of a certificate representing Shares or Warrant Shares containing a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Shares or Warrant Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.

     4.2 Furnishing of Information. As long as any Purchaser owns the
         -------------------------
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is no
longer subject to the periodic reporting requirements of the Exchange Act and
Rule 144(k) is not available to any Purchaser with respect to any Securities
held, the Company will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c)(2) such information as is required for
the Purchasers to sell the Shares and Warrant Shares under Rule 144.

     4.3 Integration. The Company shall not, and shall use its best efforts to
         -----------
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate

                                      -14-

<PAGE>

in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to the Purchasers, or that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market such that the transaction contemplated hereby would violate any such rule
or regulations.

     4.4  Subsequent Registrations; Subsequent Placements.
          -----------------------------------------------

         (a) Other than the Registration Statement, prior to the Effective Date,
the Company may not file any registration statement (other than on Form S-8)
with the Commission with respect to any securities of the Company.

         (b) Prior to the one year anniversary of the Effective Date, the
Company will not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of any of Common Stock or Common Stock
Equivalents or any of its Subsidiaries' equity or Common Stock Equivalents
pursuant to a private placement or a shelf registration statement in accordance
with Rule 415 under the Securities Act, (such offer, sale, grant, disposition or
announcement being referred to as "Subsequent Placement"), unless: (i) the
Company delivers to each Purchaser a written notice (the "Subsequent Placement
Notice") of its intention to effect such Subsequent Placement, which specifies
in reasonable detail all of the material terms of such Subsequent Placement, the
amount of proceeds intended to be raised thereunder, the names of the investors
(including the investment manager of such investors, if any) and the investment
bankers with whom such Subsequent Placement is proposed to be effected, and
attached to which shall be a term sheet or similar document and (ii) Purchasers
shall not have notified the Company by 6:30 p.m. (New York City time) on the
fifth Trading Day after their respective receipt of the Subsequent Placement
Notice of the willingness to provide (or to cause any one their respective
designees to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Placement Notice. If the Purchasers shall fail to so
notify the Company of their willingness to participate in full in the Subsequent
Placement, the Company may consummate the remaining portion of such Subsequent
Placement on the terms and to the Persons set forth in the Subsequent Placement
Notice. The Company shall provide each Purchaser with a second Subsequent
Placement Notice and each Purchaser will again have the right of first refusal
set forth in this Section 4.4(b), if the Subsequent Placement subject to the
initial Subsequent Placement Notice is not consummated for any reason on the
terms set forth in such Subsequent Notice within 30 Trading Days after the date
of the initial Subsequent Placement Notice with the Person(s) identified in the
Subsequent Placement Notice. If the Purchasers indicate in the aggregate a
willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser will be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser's Purchaser Percentage of the financing, but the Company shall
not be required to accept financing from the Purchasers in an amount in excess
of the amount set forth in the Subsequent Placement Notice.

                                      -15-

<PAGE>

         (c) The period set forth in the first sentence of Section 4.4(b) shall
be extended for the number of Trading Days during such period in which (i)
trading in the Common Stock is suspended by any Trading Market, or (ii)
following the Effective Date, the Registration Statement is not effective or the
prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Common Stock and the Warrant Shares.

         (d) The Company's obligations under Section 4.4(b) shall not apply to
any grant or issuance by the Company of any of the following: (i) the issuance
of securities upon the exercise or conversion of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement (or to any amendments
or modifications thereof), (ii) the grant of options or warrants, or the
issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan, including any inducement
grant to a new executive officer or director, (iii) the issuance of Common Stock
or Common Stock Equivalents pursuant to a Strategic Transaction or (iv) the
issuance of securities pursuant to a firm commitment underwriting (excluding an
equity line of credit and similar transactions) which results in net proceeds to
the Company in an amount equal to or in excess of $10,000,000.

     4.5 Securities Laws Disclosure; Publicity. During regular hours trading on
         -------------------------------------
the Trading Market on the Closing Date, the Company shall issue a press release
reasonably acceptable to the Purchasers disclosing the transactions contemplated
hereby and file a Current Report on Form 8-K disclosing the transactions
contemplated hereby. In addition, the Company will make such other filings and
notices in the manner and time required by the Commission and the Trading Market
on which the Common Stock is listed. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the Commission (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the Exchange Act) or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.

     4.6 Indemnification of Purchasers. In addition to the indemnity provided in
         -----------------------------
the Registration Rights Agreement, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any
such Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document; provided,
that such indemnity (other than as to any indemnity called for under the
Registration Rights Agreement) does not exceed, in the aggregate, the Investment
Amount of such Purchaser together with its reasonable attorneys' fees and costs
of investigation subject to indemnification above. Except as set forth above,
the mechanics and procedures with respect to

                                      -16-

<PAGE>

the rights and obligations under this Section 4.6 will be the same as those set
forth in the Registration Rights Agreement.

     4.7 Non-Public Information. The Company covenants and agrees that neither
         ----------------------
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.8 Use of Proceeds. The Company shall use the net proceeds from the sale
         ---------------
of the Securities hereunder for working capital purposes and to redeem the
Company's outstanding 8% Senior Secured Notes in the outstanding principal
amount of $318,155 in accordance with the terms thereof, and not to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
Action with such proceeds.

     4.9  Certain Trading Restrictions.
          ----------------------------

         (a) Restrictions. So long as a Purchaser continues to hold any
             ------------
Securities acquired hereunder, such Purchaser will not, nor will it knowingly
through its Affiliates, engage in any Short Sales, except on those days (each a
"Permitted Day") on which the aggregate short position with respect to the
Common Stock of such Purchaser prior to giving effect to any Short Sales by such
Purchaser on such Permitted Day does not exceed such Purchaser's Permitted Share
Position (as defined below) on such Permitted Day; provided, however, that a
                                                   --------
Purchaser will only be entitled to engage in transactions that constitute Short
Sales on a Permitted Day to the extent that following such transaction, the
aggregate short position with respect to the Common Stock of such Purchaser does
not exceed such Purchaser's Permitted Share Position. For purposes of this
Section 4.9, a Purchaser's "Permitted Share Position" means, with respect to any
date of determination, the number of shares of Common Stock owned by such
Purchaser (including Shares) plus the maximum number of Warrant Shares then
issuable (including as to portions of Warrants not yet exercised and without
regard to any exercise caps or other exercise restrictions applicable to the
Warrants) to such Purchaser.

         (b) Other Transactions Permitted. Subject to Section 4.9(a) and
             ----------------------------
applicable securities laws, the Company acknowledges and agrees that nothing in
this Section 4.9 or elsewhere in any Transaction Document prohibits any
Purchaser from, and each Purchaser is permitted to, engage, directly or
indirectly, in hedging transactions involving the Securities and the Common
Stock (including, without limitation, by way of short sales, purchases and sales
of options, swap transactions and synthetic transactions) at any time.

                                   ARTICLE V.
                                 MISCELLANEOUS

     5.1 Fees and Expenses. Except as contemplated in the Registration Rights
         -----------------
Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and




                                      -17-

<PAGE>

other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the sale of the Securities.

     5.2 Entire Agreement. The Transaction Documents, together with the Exhibits
         ----------------
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.3 Notices. Any and all notices or other communications or deliveries
         -------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:

     If to the Company:  American Technology Corporation
                         13114 Evening Creek Drive South
                         San Diego, CA  92128
                         Attn:  Chief Financial Officer
                         Facsimile No.:  858-486-3922

     With a copy to:     Procopio, Cory, Hargreaves & Savitch LLP
                         530 B Street, Suite 2100
                         San Diego, CA  92101
                         Attn:  John D. Tishler, Esq.
                         Facsimile No.: (619) 235-0398


     If to a Purchaser:  To the address set forth under such Purchaser's name
                         on the signature pages hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

     5.4 Amendments; Waivers. No provision of this Agreement may be waived or
         -------------------
amended except in a written instrument signed, in the case
of an amendment, by the Company and one or more Purchasers holding no less than
66 2/3% of the outstanding Shares or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of




                                      -18-

<PAGE>

any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

     5.5 Construction. The headings herein are for convenience only, do not
         ------------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

     5.6 Successors and Assigns. This Agreement shall be binding upon and inure
         ----------------------
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers."

     5.7 No Third-Party Beneficiaries. This Agreement is intended for the
         ----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.6.

     5.8 Governing Law. All questions concerning the construction, validity,
         -------------
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of

                                      -19-

<PAGE>

process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its attorney's fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.

     5.9 Survival. The representations, warranties, agreements and covenants
         --------
contained herein shall survive the Closing and the delivery of the Shares and
Warrant Shares, as applicable.

     5.10 Execution. This Agreement may be executed in two or more counterparts,
          ---------
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

     5.11 Severability. If any provision of this Agreement is held to be invalid
          ------------
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
          -------------------------------
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

     5.13 Replacement of Securities. If any certificate or instrument evidencing
          -------------------------
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

                                      -20-

<PAGE>

     5.14 Remedies. In addition to being entitled to exercise all rights
          --------
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

     5.15 Payment Set Aside. To the extent that the Company makes a payment or
          -----------------
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     5.16 Independent Nature of Purchasers' Obligations and Rights. The
          --------------------------------------------------------
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]



                                      -21-

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

                                            AMERICAN TECHNOLOGY CORPORATION


                                            ____________________________________
                                            Name:
                                            Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]



                                      -22-

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.

                                        [ ]



                                        By:_____________________________________
                                           Name:
                                           Title:

                                        Investment Amount: $[ ]

                                        Address for Notice:
                                        [ ]
                                        Facsimile No.: [ ]
                                        Attn: [ ]

                                      -23-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>dex42.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT 4.2

                          REGISTRATION RIGHTS AGREEMENT

                  This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 11, 2003, by and among American Technology
Corporation, a Delaware corporation (the "Company"), and the investors signatory
hereto (each a "Purchaser" and collectively, the "Purchasers").

                  This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

                  The Company and the Purchasers hereby agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein
        -----------
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1:

        "Calculation Ratio" means, with respect to each Holder, a fraction
where: (x) the numerator equals the sum of (i) the number of Shares and issued
Warrant Shares held by such Holder which, at the time of determination, cannot
be sold under Rule 144(k) and (ii) the aggregate number of Warrant Shares
issuable upon exercise in full of the Warrant held by such Holder and (y) the
denominator equals the sum of: (i) the aggregate number of Shares sold to the
Original Purchaser thereof pursuant to the Purchase Agreement and (ii) the
aggregate number of Warrant Shares issuable on the Closing Date upon exercise in
full of the Warrant purchased by the Original Purchaser pursuant to the Purchase
Agreement. In the event a Holder holds Shares, Warrants or Warrant Shares
deriving from more than one Original Purchaser, the Calculation Ratio and the
liquidated damages awardable pursuant to Section 2(b) shall be calculated and
awarded separately with respect to those Shares, Warrants and Warrant Shares
deriving from each Original Purchaser

        "Effective Date" means the date that the Registration Statement is first
declared effective by the Commission.

        "Effectiveness Date" means the earlier of (a) the 90th day following the
Closing Date, and (b) the fifth Trading Day following the date on which the
Company is notified by the Commission that the Registration Statement will not
be reviewed or is no longer subject to further review and comments.

        "Effectiveness Period" shall have the meaning set forth in Section 2(a).

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Filing Date" means the 30th day following the Closing Date.


<PAGE>


        "Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.

        "Indemnified Party" shall have the meaning set forth in Section 5(c).

        "Indemnifying Party" shall have the meaning set forth in Section 5(c).

        "Losses" shall have the meaning set forth in Section 5(a).

        "New Warrants" shall have the meaning set forth in the Warrants.

        "Original Purchaser" means with respect to the Shares, Warrants and
Warrant Shares held by any Holder, the Purchaser (which may be the Holder) which
purchased from the Company on the Closing Date the Shares or the Warrants held
by such Holder, or which purchased from the Company on the Closing Date the
Warrants pursuant to which the Warrant Shares held by such Holder were
purchased, as the case may be.

        "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

        "Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

        "Registrable Securities" means (i) the Shares, and (ii) the shares of
Common Stock issuable upon exercise of the Warrants, until such time as such
securities have been sold to the public pursuant to a registration statement or
other means such that they are no longer "restricted securities" under the
Securities Act.

        "Registration Statement" means the registration statement required to be
filed hereunder in accordance with Section 2, including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.

        "Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

        "Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

                                       -2-

<PAGE>


        "Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

        "Securities Act" means the Securities Act of 1933, as amended.

        "Shares" means the shares of Common Stock issued or issuable to the
Purchasers pursuant to the Purchase Agreement.

        "Special Counsel" means Bryan Cave LLP.

        "Warrants" means (i) the Warrants issued or issuable under the Purchase
Agreement, and (ii) any New Warrants issuable under the Warrants.

     2. Registration.
        ------------

        (a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith) and shall contain (except if otherwise agreed by
the Holders) the "Plan of Distribution" attached hereto as Annex A. The Company
shall cause the Registration Statement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than the
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date which
is five years after the date that the Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by the Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period").

        (b) If: (i) the Registration Statement is not filed on or prior to the
Filing Date (if the Company files the Registration Statement without affording
the Holders the opportunity to review and comment on the same as required by
Section 3(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) after the Effective Date, the Registration Statement ceases
to be effective and available to the Holders thereunder as to all of the
Registrable Securities (whether upon the delivery of a notice pursuant to
Section 6(d) or otherwise) at any time prior to the expiration of its
Effectiveness Period without becoming available to the Holders thereunder as to
all of the Registrable Securities within twenty Trading Days pursuant to the
delivery of an Advice, or (iii) the exercise rights of the Holders pursuant to
the Warrants are suspended for any reason, or (iv) the Registration Statement
shall not be declared effective by the Commission on or prior to the
Effectiveness Date (any such failure or breach being referred to as an "Event,"
and for purposes of clause (i), (iii) or (iv) the date on which such Event
occurs, or for purposes of clause (ii) the date which such twenty day-period is
exceeded, being referred to as "Event Date"), then, in addition to any other
rights available to

                                       -3-

<PAGE>

the Holders, the Company shall pay to each Holder as liquidated damages and not
as a penalty 0.05% of the product obtained by multiplying (x) the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement and (y)
such Holder's Calculation Ratio, for each day beginning with the Event Date and
ending on the day immediately prior to the date such Event is cured. If multiple
Events pursuant to clauses (i), (ii) and (iv) exist on a given day, liquidated
damages shall be payable with respect to only one Event pursuant to clauses (i),
(ii) and (iv) on such day, but shall continue to accrue until the date on which
all then existing Events pursuant to clauses (i), (ii) and (iv) are cured. The
Company shall make payment of liquidated damages no later than the first Trading
Day of the calendar month next succeeding the month in which such damages
accrue. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 12% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Holder, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.

        (c) Notwithstanding anything herein to the contrary, the Company shall
prepare and file a supplement to the Prospectus (if required and permitted for
such purpose under the Securities Act) within seven (7) Trading Days following
the written request of the holder of a New Warrant. If in the opinion of legal
counsel for the Company a post-effective amendment to the Registration
Statement, or a new Registration Statement is required to register the resale of
Warrant Shares underlying the New Warrant, the holder of the New Warrant will
have the rights set forth in Section 6(e).

     3. Registration Procedures
        -----------------------

        In connection with the Company's registration obligations hereunder, the
Company shall:

        (a) Not less than two Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall furnish to the Holders and the Special Counsel copies
of all such documents proposed to be filed which documents will be subject to
the review of such Holders and the Special Counsel. The Company shall not file
the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or the Special Counsel shall reasonably object in good faith.

        (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within fifteen (15) days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and, as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and to
the Commission

                                       -4-

<PAGE>

relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

        (c) Notify the Holders of Registrable Securities to be sold and the
Special Counsel as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than three Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

        (d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

        (e) Furnish to each Holder, without charge, at least one conformed copy
of each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

        (f) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to

                                       -5-

<PAGE>

the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.

        (g) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of all jurisdictions within the United
States, to keep each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.

        (h) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to the Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

        (i) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

        (j) Comply with all applicable rules and regulations of the Commission.

        (k) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder, the controlling person thereof and the nature
of any position, office or other material relationship (other than as a
shareholder of the Company) which the Holder has had within the past three years
with the Company.

     4. Registration Expenses. All fees and expenses incident to the performance
        ---------------------
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with Nasdaq SmallCap Market or any other Trading Market, and
(B) in compliance with applicable state securities or Blue Sky laws), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority

                                       -6-

<PAGE>

of the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and up to $5,000 of the fees and disbursements of
Special Counsel, (v) Securities Act liability insurance, if the Company so
desires such insurance, and (vi) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

                                       -7-

<PAGE>

     5. Indemnification

        (a) Indemnification by the Company. The Company shall, notwithstanding
            ------------------------------
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, investment advisors and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (2) in the case of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.

        (b) Indemnification by Holders. Each Holder shall, severally and not
            --------------------------
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue statement of a material fact contained in any Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by

                                       -8-

<PAGE>

such Holder expressly for use in the Registration Statement (it being
understood that the Holder has approved Annex A hereto for this purpose), such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

        (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
            --------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.

        An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

        All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to

                                       -9-

<PAGE>

indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

        (d) Contribution. If a claim for indemnification under Section 5(a) or
            ------------
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

        The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.

        The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     6. Miscellaneous
        -------------

        (a) Remedies. In the event of a breach by the Company or by a Holder, of
            --------
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

                                      -10-

<PAGE>

        (b) No Piggyback on Registrations. Except as and to the extent specified
            -----------------------------
in Schedule 6(b) hereto, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders. Except as and
to the extent specified in Schedule 6(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person which have not been fully satisfied.

        (c) Compliance. Each Holder covenants and agrees that it will comply
            ----------
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.

        (d) Discontinued Disposition. Each Holder agrees by its acquisition of
            ------------------------
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Section 3(c), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

        (e) Piggy-Back Registrations. If at any time during the Effectiveness
            ------------------------
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

        (f) Amendments and Waivers. The provisions of this Agreement, including
            ----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holder or Holders of no less than 66?% of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent

                                      -11-

<PAGE>

relates, provided, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

        (g) Notices. Any and all notices or other communications or deliveries
            -------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:

         If to the Company:         American Technology Corporation
                                    13114 Evening Creek Drive South
                                    San Diego, CA  92128
                                    Attn:  Chief Financial Officer
                                    Facsimile No.:  (858) 486-3922

         With a copy to:            Procopio, Cory, Hargreaves & Savitch LLP
                                    530 B Street, Suite 2100
                                    San Diego, CA  92101
                                    Attn:  John D. Tishler, Esq.
                                    Facsimile No.:    (619) 235-0398


         If to a Purchaser:         To the address set forth under such
                                    Purchaser's name on the signature pages
                                    hereto.

         With a copy to:            Bryan Cave LLP
                                    1290 Avenue of the Americas
                                    New York, NY 10101
                                    Attn.: Eric L. Cohen, Esq.
                                    Fax No.: (212) 541-4630 and (212) 541-1432

         If to any other Person who is then the registered Holder:

                                    To the address of such Holder as it appears
                                    in the stock transfer books of the Company

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

        (h) Successors and Assigns. This Agreement shall inure to the benefit of
            ----------------------
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the

                                      -12-

<PAGE>

benefit of each Holder. The Company may not assign its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may
assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

        (i) Execution and Counterparts. This Agreement may be executed in any
            --------------------------
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

        (j) Governing Law. All questions concerning the construction, validity,
            -------------
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Agreement,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

        (k) Cumulative Remedies. The remedies provided herein are cumulative and
            -------------------
not exclusive of any remedies provided by law.

        (l) Severability. If any term, provision, covenant or restriction of
            ------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that

                                      -13-

<PAGE>

they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

        (m) Headings. The headings in this Agreement are for convenience of
            --------
reference only and shall not limit or otherwise affect the meaning hereof.

        (n) Independent Nature of Purchasers' Obligations and Rights. The
            --------------------------------------------------------
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]

                                      -14-

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            AMERICAN TECHNOLOGY CORPORATION


                                            By:_________________________________
                                            Name:
                                            Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES OF PURCHASER TO FOLLOW]




<PAGE>


     IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                    [ ]


                                    By:_____________________________________
                                      Name:
                                      Title:

                                    Address for Notice:

                                    [ ]
                                    Facsimile No.: [ ]
                                    Attn: [ ]

                                      -16-

<PAGE>
                                                                         Annex A

                              Plan of Distribution

         The Selling Stockholders and any of their pledgees, transferees, donees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:

$    ordinary brokerage transactions and transactions in which the broker-dealer
     solicits purchasers;

$    block trades in which the broker-dealer will attempt to sell the shares as
     agent but may position and resell a portion of the block as principal to
     facilitate the transaction;

$    purchases by a broker-dealer as principal and resale by the broker-dealer
     for its account;

$    an exchange distribution in accordance with the rules of the applicable
     exchange;

$    privately negotiated transactions;

$    short sales

$    broker-dealers may agree with the Selling Stockholders to sell a specified
     number of such shares at a stipulated price per share;

$    a combination of any such methods of sale; and

$    any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

     The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the Shares or Warrant Shares owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell shares of Common Stock from time to time
under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933

                                      -17-

<PAGE>

amending the list of selling stockholders to include the pledgee, transferee,
donee or other successors in interest as selling stockholders under this
prospectus.

     The Selling Stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees, donees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

     The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.

     The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

                                      -18-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>dex43.txt
<DESCRIPTION>FORM OF COMMON STOCK WARRANT
<TEXT>
<PAGE>
                                                                     EXHIBIT 4.3

                                                                       EXHIBIT A

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.

                         AMERICAN TECHNOLOGY CORPORATION

                                     WARRANT

Warrant No. [  ]                        Date of Original Issuance: July 11, 2003

     American Technology Corporation, a Delaware corporation (the "Company"),
hereby certifies that, for value received, [ ] or its registered assigns (the
"Holder"), is entitled to purchase from the Company up to a total of [ ]/1/
shares of common stock, par value $.00001 per share (the "Common Stock"), of the
Company (each such share, a "Warrant Share" and all such shares, the "Warrant
Shares") at an exercise price equal to $6.75 per share (as adjusted from time to
time as provided in Section 9, the "Exercise Price"), at any time and from time
to time from and after the date hereof and through and including July 10, 2007
(the "Expiration Date"), and subject to the following terms and conditions:

     1. Definitions. In addition to the terms defined elsewhere in this Warrant,
        -----------
capitalized terms that are not otherwise defined herein shall have the meanings
given to such terms in the Securities Purchase Agreement of even date herewith
to which the Company and the original Holder are parties (the "Purchase
Agreement").

     2. Registration of Warrant. The Company shall register this Warrant, upon
        -----------------------
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder

- --------
1   The number of shares of Common Stock equal to 25% of the quotient obtained
    by dividing the Investment Amount of such Purchaser by the Per Unit Purchase
    Price.

<PAGE>

of this Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.

     3. Registration of Transfers. The Company shall register the transfer of
        -------------------------
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a "New Warrant"), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.

     4. Exercise and Duration of Warrants. This Warrant shall be exercisable by
        ---------------------------------
the registered Holder at any time and from time to time on or after the date
hereof to and including the Expiration Date, but not for less than 2,500 Warrant
Shares at a time (or such lesser number of Warrant Shares that may then
constitute the maximum number purchasable; such number being subject to
adjustment as provided in Section 9 below). At 6:30 p.m., New York City time on
the Expiration Date, the portion of this Warrant not exercised prior thereto
shall be and become void and of no value. The Company may not call or redeem all
or any portion of this Warrant without the prior written consent of the Holder.

     5. Delivery of Warrant Shares.
        --------------------------

        (a) To effect conversions hereunder, the Holder shall not be required to
physically surrender this Warrant unless the aggregate Warrant Shares
represented by this Warrant is being exercised. Upon delivery of the Exercise
Notice to the Company (with the attached Warrant Shares Exercise Log) at its
address for notice set forth herein and upon payment of the Exercise Price
multiplied by the number of Warrant Shares that the Holder intends to purchase
hereunder, the Company shall promptly (but in no event later than three Trading
Days after the Date of Exercise (as defined herein)) issue and deliver to the
Holder, a certificate for the Warrant Shares issuable upon such exercise, which
shall be free of restrictive legends in the circumstances specified in the
Purchase Agreement. The Company shall, upon request of the Holder and subsequent
to the date on which a registration statement covering the resale of the Warrant
Shares has been declared effective by the Securities and Exchange Commission,
use its best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions, if available, provided, that, the Company may, but
will not be required to change its transfer agent if its current transfer agent
cannot deliver Warrant Shares electronically through the Depository Trust
Corporation. A "Date of Exercise" means the date on which the Holder shall have
delivered to Company: (i) the Exercise Notice (with the Warrant Exercise Log
attached to it), appropriately completed and duly signed and (ii) if such Holder
is not utilizing the cashless exercise provisions set forth in this Warrant,
payment of the Exercise Price for the number of Warrant Shares so indicated by
the Holder to be purchased.

                                       -2-

<PAGE>

        (b) If by the third Trading Day after a Date of Exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), then the Holder will have the right to rescind such
exercise.

        (c) If by the third Trading Day after a Date of Exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), and if after such third Trading Day and prior to the
receipt of such Warrant Shares, the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the
exercise at issue by (B) the closing bid price of the Common Stock at the time
of the obligation giving rise to such purchase obligation and (2) at the option
of the Holder, either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations hereunder.
The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In.

        (d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
        ---------------------------
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
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 registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
        ----------------------
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon

                                       -3-

<PAGE>

cancellation hereof, or in lieu of and substitution for this Warrant, a New
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity (which shall not include a surety bond), if requested. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe. If a New Warrant is requested as a result of
a mutilation of this Warrant, then the Holder shall deliver such mutilated
Warrant to the Company as a condition precedent to the Company's obligation to
issue the New Warrant.

     8. Reservation of Warrant Shares. The Company covenants that it will at all
        -----------------------------
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
                                            ---------
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.

     9. Certain Adjustments. The Exercise Price and number of Warrant Shares
        -------------------
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
                          ---------

        (a) Stock Dividends and Splits. If the Company, at any time while this
            --------------------------
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.

     (b) Pro Rata Distributions. If the Company, at any time while this Warrant
         ----------------------
is outstanding, distributes to all holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "Distributed
Property"), then upon any exercise of the Warrant that occurs after the record
date for such distribution, such Holder shall be entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such conversion, the
Distributed Property that such

                                       -4-

<PAGE>

Holder would have been entitled to receive in respect of such number of Warrant
Shares had the Holder been the record holder of such Warrant Shares immediately
prior to such record date, but not before the time such Holder would have
received the Distributed Property if it held the Warrant Shares on such record
date.

     (c) Fundamental Transactions. If, at any time while this Warrant is
         ------------------------
outstanding, (1) the Company effects any merger or consolidation of the Company
with or into another Person, (2) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (3)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (4) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "Alternate Consideration").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder's option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a new
warrant substantially in the form of this Warrant and consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

     (d) Future Issuances.
         ----------------

     (1) If the Company or any subsidiary thereof, as applicable with respect to
Common Stock Equivalents (as defined below), at any time while this Warrant is
outstanding, shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that are convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents"), entitling any Person to acquire
shares of Common Stock at a price per share less than the Exercise Price
(subject to equitable adjustment for stock splits, recombinations and similar
transactions) (if the holder of the Common Stock or Common Stock Equivalent so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights issued

                                       -5-

<PAGE>

in connection with such issuance, be entitled to receive shares of Common Stock
at a price less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price), then, at the option of the Holder,
the Exercise Price shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such shares of Common Stock or such Common Stock Equivalents
plus the number of shares of Common Stock which the offering price for such
shares of Common Stock or Common Stock Equivalents would purchase at the
Exercise Price, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock so issued or issuable. For purposes hereof, all
shares of Common Stock that are issuable upon conversion, exercise or exchange
of Common Stock Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock Equivalents. Such adjustment shall be made
whenever such shares of Common Stock or Common Stock Equivalents are issued. The
Company shall notify the Holder in writing, no later than the Trading Day
following the issuance of any Common Stock or Common Stock Equivalent subject to
this section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms.

     (2) The adjustment of the Exercise Price described in Section 9(d)(1) above
shall not apply to: (i) the issuance of securities upon the exercise or
conversion of any Common Stock Equivalents issued by the Company prior to the
date of this Agreement (or to any amendments or modifications thereof other than
such modifications or amendments which have the effect of lowering the exercise,
conversion or purchase price thereof), (ii) the grant of options or warrants, or
the issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan, including any inducement
grant to a new executive officer or director, or (iii) the issuance of Common
Stock or Common Stock Equivalents pursuant to a Strategic Transaction (as
defined in the Purchase Agreement).

     (e) Number of Warrant Shares. Simultaneously with any adjustment to the
         ------------------------
Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the adjusted number of Warrant Shares shall be the
same as the aggregate Exercise Price in effect immediately prior to such
adjustment.

     (f) Calculations. All calculations under this Section 9 shall be made to
         ------------                              ---------
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

     (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
         ---------------------
to this Section 9, the Company at its expense will promptly compute such
        ---------
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such

                                       -6-

<PAGE>

adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer Agent.

        (h) Notice of Corporate Events. If the Company (i) declares a dividend
            --------------------------
or any other distribution of cash, securities or other property in respect of
its Common Stock, including without limitation any granting of rights or
warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least 20 calendar days
prior to the applicable record or effective date on which a Person would need to
hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.

     10. Payment of Exercise Price. The Holder may pay the Exercise Price in one
         -------------------------
of the following manners:

         (a) Cash Exercise. The Holder may deliver immediately available funds;
             -------------
or

         (b) Cashless Exercise. If an Exercise Notice is delivered after the
             -----------------
Effectiveness Date (as defined in the Registration Rights Agreement among the
original Holder and the Company in connection with this Warrant) and a
registration statement permitting the Holder to resell the Warrant Shares is not
then effective or the prospectus forming a part thereof is not then available to
the Holder for the resale of the Warrant Shares, then the Holder may notify the
Company in an Exercise Notice of its election to utilize cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

                               X = Y [(A-B)/A]

                        where:

                               X = the number of Warrant Shares to be issued to
                                   the Holder.

                               Y = the number of Warrant Shares with respect to
                               which this Warrant is being exercised.

                               A = the average of the closing prices for the
                               five Trading Days immediately prior to (but not
                               including) the Exercise Date.

                               B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed

                                       -7-

<PAGE>


to have been acquired by the Holder, and the holding period for the Warrant
Shares shall be deemed to have commenced, on the date this Warrant was
originally issued.

     11. Limitation on Exercise. (a) Notwithstanding anything to the contrary
         ----------------------
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
Each delivery of an Exercise Notice hereunder will constitute a representation
by the Holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Warrant Shares requested in
such Exercise Notice is permitted under this paragraph. This provision shall not
restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a merger or other
business combination or reclassification involving the Company as contemplated
in Section 9 of this Warrant. This restriction may not be waived.

         (b) If the Company has not obtained the Shareholder Approval (as
defined below), then the Company may not issue in excess of 1,550,655 shares of
Common Stock upon exercise of the Warrants (as defined in the Purchase
Agreement) at an exercise price below the closing sale price of the Common Stock
on the Trading Day immediately preceding the original date of this Warrant (such
number of shares of Common Stock, the "Issuable Maximum"). Each holder of
Warrants shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing: (x) the purchase price paid by it pursuant to the
Purchase Agreement by (y) the purchase price paid by all holders pursuant to the
Purchase Agreement. If a holder of Warrants shall no longer hold its Warrant due
to exercise or cancellation of its Warrant, then such holder's remaining portion
of the Issuable Maximum shall be allocated pro-rata among the remaining holders
of the Warrants. If on any Date of Exercise: (A) the aggregate number of shares
of Common Stock that would then be issuable upon exercise in full of this
Warrant would exceed the Issuable Maximum, and (B) the Company shall not have
previously obtained the vote of shareholders (the "Shareholder Approval"), if
any, as may be required by the applicable rules and regulations of the Nasdaq
National Market (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder a number of shares of Common
Stock equal to the Issuable Maximum and, with respect to the remainder of the
Warrant Shares then issuable under the Warrant for which an exercise in
accordance with the applicable exercise price would result in an issuance of
shares of Common Stock in excess of the Issuable Maximum (the "Excess Warrant
Shares"), the Holder shall have the option to require the Company to use its
best efforts to obtain the Shareholder Approval applicable to such issuance as
soon as is possible, but in any event not later than the 90th day after such
request. The Company and the Holder understand and agree that shares of Common
Stock issued to and then held by the Holder as a result of exercise of this
Warrant shall not be entitled to cast votes on any resolution to obtain

                                       -8-

<PAGE>

Shareholder Approval pursuant hereto. If the Company shall succeed in obtaining
the Shareholder Approval, the Excess Warrant Shares shall again become fully
exercisable by the Holder.

     12. No Fractional Shares. No fractional shares of Warrant Shares will be
         --------------------
issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the closing price of one
Warrant Share as reported on the Nasdaq National Market on the date of exercise.

     13. Notices. Any and all notices or other communications or deliveries
         -------
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to American Technology Corporation, 1311 Evening Creek Drive South,
San Diego, CA 92128, Attn: Chief Financial Officer, Facsimile No.: 858-486-3922,
or (ii) if to the Holder, to the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section.

     14. Warrant Agent. The Company shall serve as warrant agent under this
         -------------
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

     15. Miscellaneous.
         -------------

         (a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended only
in writing signed by the Company and holder or holders of Warrants representing
no less than 66?% in interest of the Warrant Shares then issuable upon exercise
of all of the Warrants issued pursuant to the Purchase Agreement, and any
amendment so effected shall be binding upon each holder of such Warrants,
provided, that (y) any such amendment or waiver must apply to all Warrants; and
- --------
(z) the number of Warrant Shares subject to this Warrant, the Exercise Price
(except for adjustments pursuant to Section 9(d)) and the expiration date of
this

                                       -9-

<PAGE>

Warrant may not be amended, and the right to exercise this Warrant (including,
without limitation, the provisions of Section 10 of this Warrant) may not be
altered or waived, without the written consent of the Holder.

        (b) All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of this
Warrant and the transactions herein contemplated ("Proceedings") (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the "New York Courts"). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim
that it is not personally subject to the jurisdiction of any New York Court, or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Warrant or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions of
this Warrant, then the prevailing party in such Proceeding shall be reimbursed
by the other party for its attorney's fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.

        (c) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.

        (d) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]


                                      -10-

<PAGE>


         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                     AMERICAN TECHNOLOGY CORPORATION

                                     By:
                                        ----------------------------------------
                                     Name:
                                     Title:



                                      -11-

<PAGE>

                                 EXERCISE NOTICE

To American Technology Corporation:

         The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, par value $.00001 per share, of American Technology
Corporation ("Common Stock"), pursuant to Warrant No. [ ], originally issued
July 11, 2003 (the "Warrant"), and, if such Holder is not utilizing the cashless
exercise provisions set forth in the Warrant, encloses herewith $________ in
cash, certified or official bank check or checks or other immediately available
funds, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Exercise Notice
relates, together with any applicable taxes payable by the undersigned pursuant
to the Warrant.

         By its delivery of this Exercise Notice, the undersigned represents and
warrants to the Company that in giving effect to the exercise evidenced hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock (determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934) permitted to be owned under Section 11 of this Warrant to which
this notice relates.

         The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                                PLEASE INSERT SOCIAL SECURITY OR
                                                TAX IDENTIFICATION NUMBER

                         (Please print name and address)

<PAGE>


                           Warrant Shares Exercise Log
                           ---------------------------
<TABLE>
<CAPTION>

- ----------------------------- ----------------------------- ---------------------------------- ---------------------
Date                          Number of Warrant Shares      Number of Warrant Shares           Number of Warrant
                              Available to be Exercised     Exercised                          Shares Remaining to
                                                                                               be Exercised
- ----------------------------- ----------------------------- ---------------------------------- ---------------------
<S>                           <C>                           <C>                                <C>











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

</TABLE>

<PAGE>


                               FORM OF ASSIGNMENT

         [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of American Technology
Corporation to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of the Company with full power of
substitution in the premises.

Dated:   _______________, ____

                                         ---------------------------------------
                                         (Signature must conform in all respects
                                         to name of holder as specified on the
                                         face of the Warrant)



                                         ---------------------------------------
                                         Address of Transferee

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

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


In the presence of:


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






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>dex991.txt
<DESCRIPTION>PRESS RELEASE
<TEXT>
<PAGE>
                                                                    EXHIBIT 99.1

FOR IMMEDIATE RELEASE

                    AMERICAN TECHNOLOGY CORPORATION ANNOUNCES
                       $10 MILLION INSTITUTIONAL FINANCING

          New Capital to Accelerate Marketing, Sales and Deliveries of
                   ATC's Core Sound Technologies and Products

(SAN DIEGO, CALIFORNIA - July 17, 2003) - American Technology Corporation
(NASDAQ: ATCO) announced today that it received $10 million in institutional
financing through the sale of common shares and warrants to selected
institutional investors. The institutions are well known technology investors
including Vertical Ventures Investments, Special Situations Funds and SDS
Merchant Fund.

The company expects to use the net proceeds from this institutional financing
for marketing, sales and deliveries of its proprietary core sound technologies
and products including Generation II HSS(R) highly directional sound systems,
its long range sound products (LRAD(TM) and HIDA(TM)) and thin panel
NeoPlanar(R) speakers as well as for general working capital.

"This funding accelerates our corporate mission of Shaping the Future of
Sound(TM) by strengthening our balance sheet and providing the resources to
expand our sales force and speed deliveries of our revolutionary audio products
to original equipment manufacturers and government and military agencies," said
James Irish, CEO of American Technology Corporation.

The proceeds are in exchange for 1,818,180 shares of the company's common stock
and warrants to purchase 454,547 shares of the company's common stock. The
shares of common stock were sold at a price of $5.50 per share and the warrants
have an exercise price of $6.75 per share. The warrants are immediately
exercisable and expire in July 2007. If exercised, the warrants could generate
up to an additional $3 million in proceeds to American Technology.

The common stock and warrants to purchase common stock have not been registered
under the Securities Act of 1933, as amended, and may not be offered or sold in
the United States without a registration statement or exemption from
registration. The company has agreed to file a registration statement on the
securities. The company's Form 8-K, to be filed with the SEC, will provide a
description of this transaction and copies of the executed documents.

About American Technology Corporation

American Technology Corporation is Shaping the Future of Sound(R) by developing
and licensing its technology and intellectual property portfolio which includes:
the award-winning HSS(R) (HyperSonic(R) Sound Technology); NeoPlanar(R)
Technology; PureBass(R) Sub-Woofer Technology; HIDA(TM) (High Intensity Directed
Acoustics), LRAD(TM) (Long Range Acoustic Device) and Stratified Field(R)
Technology. The Company is establishing a strong portfolio of patents,
trademarks, and know-how including over 138 U.S. and Foreign patents and patent
filings to date. For more information on the company and its technologies and
products please visit our web site at www.atcsd.com.
                                      -------------

                                    - MORE -

<PAGE>

Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: This document contains forward-looking statements relating to future
transactions, performance, technology and product development which may affect
future results and the future viability of the company. Actual results could be
affected or differ materially from those projected in the forward-looking
statements as a result of risks and uncertainties, including the ability of the
company to continue as a going concern, development of future products,
technological shifts, potential technical or manufacturing difficulties that
could delay new products, competition, general economic factors, pricing
pressures, the uncertainty of market acceptance of new products and services by
OEMs and end-user customers, and other factors identified and discussed in the
company's most recent filings with the Securities and Exchange Commission. These
forward-looking statements are based on information and management's
expectations as of the date hereof. Future results may differ materially from
the company's current expectations. American Technology Corporation disclaims
any intent or obligation to update those forward-looking statements, except as
otherwise specifically stated by it.

                                      # # #

Editors Note: HyperSonic Sound, HSS, NeoPlanar, PureBass, HIDA, LRAD, and
Shaping the Future of Sound are trademarks or registered trademarks of American
Technology Corporation. All other company, product, and service names are the
property of their respective owners.

FOR FURTHER INFORMATION CONTACT:

Investor relations:
Robert Putnam
(858) 679-3168
robert@atcsd.com

Media inquiries:
Don Mathias
(949) 855-4520
dwmath@aol.com



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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