Exhibit 4.2
COMMON STOCK PURCHASE
WARRANT
To Purchase
Shares of Class A Common Stock of
August , 2008
WAVE SYSTEMS CORP.
THIS COMMON STOCK PURCHASE WARRANT
(the “ Warrant ”) certifies that, for value
received, Security Research Associates, Inc. (the “
Holder ”), is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set
forth, at any time on or after the 180th day following the date
hereof (the “ Initial Exercise Date ”) and on or
prior to the close of business on February ,
2010 (the “ Termination Date ”) but not
thereafter, to subscribe for and purchase from Wave Systems Corp.,
a Delaware corporation (the “ Company ”), up to
shares
(the “ Warrant Shares” ) of Class A Common
Stock, par value $0.01 per share, of the Company (the “
Common Stock ”). The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).
Section 1.
Definitions . As used herein, the following terms shall
have the following meanings:
“ Trading Day”
means a day on which the Common Stock is traded on a Trading
Market.
“ Trading Market
” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in
question: the Nasdaq Global Market, the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market or the OTC
Bulletin Board.
Section 2.
Exercise.
(a)
Exercise of Warrant . Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or
before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may
designate by notice in writing to the registered Holder at the
address of such Holder appearing on the books of the Company);
provided , however , within 2 Trading Days of the
date said Notice of Exercise is delivered to the Company, if this
Warrant is exercised in full, the Holder shall have surrendered
this Warrant to the Company and the Company shall have received
payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a
United States bank. Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of
the Warrant Shares available hereunder and the Warrant has been
exercised in full. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall honor any valid Notice of Exercise
Form pursuant to the terms hereof. The Company shall deliver
an objection to any invalid Notice of Exercise Form within 3
Trading Days of its receipt thereof. The Holder and any assignee,
by acceptance
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of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase
of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
(b)
Exercise Price . The exercise price of the Common
Stock under this Warrant shall be $0.65 subject to adjustment
hereunder (the “ Exercise Price ”).
(c)
Cashless Exercise . This Warrant may also be exercised by
means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:
(A) = the VWAP on the
Trading Day immediately preceding the date of such
election;
(B) = the Exercise Price
of this Warrant, as adjusted; and
(X) = the number of
Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather
than a cashless exercise.
For purposes hereof “VWAP “ means,
for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then
listed or quoted for trading as reported by Bloomberg Financial
L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b) if the OTC
Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board; (c) if the Common Stock is
not then quoted for trading on the OTC Bulletin Board and if prices
for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined in a reasonable manner and in
good faith by the Company.
(d)
Mechanics of Exercise .
i.
Authorization of Warrant Shares . The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will,
upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
ii.
Delivery of Certificates Upon Exercise . Certificates
for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission (“
DWAC ”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified
by the Holder in the Notice of Exercise within 3 Trading Days from
the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“ Warrant
Share Delivery Date ”). This Warrant shall be deemed to
have been
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exercised on the date the Exercise
Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if
any, have been paid.
iii.
Delivery of New Warrants Upon Exercise . If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iv.
Rescission Rights . If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 2(c) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.
v.
No Fractional Shares or Scrip . No fractional shares
or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Exercise Price.
vi.
Charges, Taxes and Expenses . Issuance of certificates
for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of
the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued
in the name of the Holder or in such name or names as may be
directed by the Holder; provided , however , that in
the event certificates for Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental
thereto.
vii.
Closing of Books . The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms
hereof.
(e)
Exercise Without Registration Statement . If, at the
time of any exercise of this Warrant, the Warrant Shares shall not
be registered under the Securities Act of 1933, as amended (the
“Securities Act”), the Company may require, as a
condition of such exercise, that the Holder furnish to the Company
an opinion of counsel
