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Exhibit 4.2
COMMON STOCK PURCHASE WARRANT
To Purchase
Shares of
Class A Common Stock of
Delaware , 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 December ,
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 Capital
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 $0.28 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) pays a st
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