Exhibit 4.2
COMMON STOCK PURCHASE
WARRANT
To Purchase
Shares of
Class A Common Stock of
October , 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 date hereof (the “
Initial Exercise Date ”) and on or prior to the close
of business on October , 2011 (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
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 $0.40 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
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 reasonably satisfactory to the Company to the
effect that such exercise may be made without registration under
the Securities Act or registration or qualification under any state
or other applicable securities laws.
Section 3.
Certain
Adjustments.
(a)
Stock Dividends and
Splits . If the
Company, at any time while this Warrant is outstanding:
(A)&n
