Document:

pcg8k090208ex4-1.htm

    
      

      

    

    

    
      	
              PROMISSORY
      NOTE

            

    

    

    
      	
              Park
      City, Utah

            	
              
August
      __, 2008 2008

            

    

    

    
      	
              PROMISE TO
      PAY:  For value received, the undersigned Maker promises
      to pay to the order of Holder the Principal Amount, together with interest
      on the unpaid balance of such amount, in lawful money of the United States
      of America, in accordance with all the terms, conditions, and covenants of
      this Note.

            

    

    

    
      	
              MAKER: Park City Group,
      Inc. (including its successors and assigns,
  "Maker").

            

    

    

    
      	
              MAKER'S ADDRESSES FOR
      NOTICE: 3160 Pinebrook Rd. Park City, UT
  84098

            

    

    

    
      	
              HOLDER:
      _______________________ (including its successors and assigns,
      "Holder")

            

    

    

    
      	
              HOLDER'S ADDRESS FOR
      PAYMENT:
  _________________________________

            

    

    

    
      	
              PRINCIPAL AMOUNT:
      $__________________

            

    

    

    
      	
              INTEREST RATE: Ten
      Percent (10%) per annum

            

    

    

    
      	
              PAYMENT
      TERMS:  The Principal Amount together with accrued and
      unpaid interest shall be due and payable on December 1,
    2008.

            

    

    

    
      	
              LATE CHARGE:
      None.

            

    

    

    
      	
              1.

            	
              INTEREST
      PROVISIONS.

            

    

    

    
      	
               
      

            	
              (a)

            	
              Rate.
      The principal balance of this Note from time to time remaining unpaid
      prior to maturity shall bear interest at the Interest Rate per annum
      stated above. Interest shall be calculated on the unpaid principal balance
      of this Note beginning on the date
hereof.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Interest
      After Default. At Holder's option, the unpaid principal balance shall bear
      interest after maturity (whether by acceleration or otherwise) at the
      "Default Interest Rate". The Default Interest Rate shall be (i) the
      Interest Rate stated on the first page of this Note plus eight (18)
      percentage points; or (ii) such lesser rate of interest as Holder in its
      sole discretion may choose to charge; but never more than the Maximum
      Lawful Rate or at a rate that would cause the total interest contracted
      for, charged, or received by Holder to exceed the Maximum Lawful
      Amount.

            

    

    

    
      	
               
      

            	
              (c)

            	
              Daily
      Computation of Interest. Any interest payable herein shall be computed on
      the basis of a calendar year consisting of 365 or 366, as the case may be.
      In no event shall Holder compute the interest in a manner that would cause
      Holder to contract for, charge, or receive interest that would exceed the
      Maximum Lawful Rate or the Maximum Lawful
  Amount.

            

    

    

    
      	
              2.

            	
              DEFAULT
      PROVISIONS.

            

    

    

    
      	
               
      

            	
              (a)

            	
              Events
      of Default. Events of Default are as
follows:

            

    

    

    
      	
               
      

            	
              (i)

            	
              There
      is default in the payment of any installment of principal, interest, or
      any other sum required to be paid under the terms of this Note and such
      default is not cured within thirty (30) days of the applicable due
      date;

            

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (ii)

            	
              The
      bankruptcy or insolvency of, the assignment for the benefit of creditors
      by, or the appointment of a receiver for any of the property of, or the
      liquidation, termination, dissolution or death or legal incapacity of, any
      party liable for the payment of this Note, whether as maker, endorser,
      guarantor, surety or otherwise.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Non-Waiver
      by Holder. Any previous extension of time, forbearance, failure to pursue
      some remedy, acceptance of late payments, or acceptance of partial payment
      by Holder, before or after maturity, does not constitute a waiver by
      Holder of his subsequent right to strictly enforce the terms of this
      Note.

            

    

    

    
      	
              3.

            	
              PREPAYMENT.
      Maker may make payments of principal at any time before they are due. When
      Maker makes a prepayment, Maker will notify Holder in writing that Maker
      is doing so. Maker may make a full prepayment or partial prepayments of
      principal without paying any prepayment charge or premium. Holder will
      apply all prepayments first to pay all outstanding interest, if any, and
      then, to reduce the amount of principal that Maker owes under this Note.
      If Maker makes a partial prepayment, there will be no changes in the due
      date or in the amount of any scheduled payments under this Note unless
      Holder agrees in writing to those
changes.

            

    

    

    
      	
              4.

            	
              MISCELLANEOUS
      PROVISIONS.

            

    

    

    
      	
              (a)

            	
              Subsequent
      Holder. All references to Holder in this Note shall also refer to any
      subsequent owner or holder of this Note by transfer, assignment,
      endorsement, or otherwise any successor or assign of Holder, or any entity
      or person who is entitled to receive payments under this
    Note.

            

    

    

    
      	
            	
              (b)

            	
              No
      Transfer. Holder and Maker shall not assign or transfer this Note to any
      other      party without the written consent
      of the other party.

            

    

    

    
      	
              
              

            	
              (c)

            	
               Successors
      and Assigns. The provisions of this Note shall be binding upon the
      successors, assigns, heirs, executors, and administrators of Maker, and
      shall inure to the benefit of the successors and assigns of Holder;
      provided, however, that no obligations of Maker hereunder can be assigned
      without Holder's prior written
consent.

            

    

    

    
      	
            	
              (d)

            	
              No
      Duty or Special Relationship. If Holder and Maker are now engaged in or in
      the future engage in other business transactions, such other business
      transactions are independent of this Note and the indebtedness evidenced
      hereby and of the promises and covenants made by Maker in this Note, and
      vice versa.

            

    

    

    
      	
            	
              (e)

            	
              Modifications.
      Any modifications agreed to by Holder relating to the release of liability
      of any of the parties primarily or secondarily liable for the payment of
      this Note, or relating to the release, substitution, or subordination of
      all or part of the security for this Note, shall in no way constitute a
      release of liability with respect to the other parties or security not
      covered by such modification.

            

    

    

    
      	
              
              

            	
              (f)

            	
               Entire
      Agreement. Maker warrants and represents that this Note constitutes the
      entire agreement between Maker and Holder with respect to the loan
      evidenced by this Note and agree that no modification, amendment, or
      additional agreement with respect to such loan or the advancement of funds
      hereunder will be valid and enforceable unless made in writing signed by
      both Maker and Holder.

            

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    
      	
            	
              (g)

            	
              Maker's
      Addresses for Notice. All notices required to be sent by Holder to Maker
      shall be sent by U.S. Mail, postage prepaid, to Maker's Addresses for
      Notice stated on the first page of this Note, until Holder shall receive
      written notification from Maker of a new address, or addresses, for
      notice.

            

    

    

    
      	
            	
              (h)

            	
              Holder's
      Address for Payment. All sums payable by Maker to Holder shall be paid at
      Holder's Address for Payment stated on the first page of this Note, or at
      such other address as Holder shall designate from time to
      time.

            

    

    

    
      	
              
              

            	
              (i)

            	
              Partial
      Invalidity. The unenforceability or invalidity of any provision of this
      Note shall not affect the enforceability or validity of any other
      provision herein, and the invalidity or unenforceability of any provision
      of this Note as to any person or circumstance shall not affect the
      enforceability or validity of such provision as it may apply to other
      persons or circumstances.

            

    

    

    
      	
            	
              (j)

            	
              APPLICABLE
      LAW; VENUE & JURISDICTION. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE
      WITH THE APPLICABLE LAWS OF THE STATE OF UTAH AND THE LAWS OF THE UNITED
      STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN UTAH. In any litigation in
      connection with this Note or any foreclosure of Holder's security interest
      in the Collateral, Maker and all other persons liable for payment of all
      or any part of the indebtedness evidenced hereby, and each of them,
      irrevocably consent to and confer personal jurisdiction on the courts of
      the State of Utah or the United States courts located within the State of
      Utah.

            

    

    

    
      	
              EXECUTED
      to be effective the __ day of August,
2008.

            

    

    

    
      	 
      	
              MAKER:

            
	 
      	
              Park
      City Group, Inc.

            
	 
      	 
      
	 
      	
              By
      _______________________________

            
	 
      	 
      
	 
      	
              Its
      _______________________________

            

    

    

    

    
      	
              Agreed
      to and Accepted by:

            

    

    

    
      	
              HOLDER:

            

    

    

    

    

    

    
      	
              By:
      ________________________

            

    

    

    
      	
              Its:
      ___________________________Exhibit 4.1

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase
         Shares of Class A Common
Stock of

September     , 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 March     , 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 

 

 

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 $0.50
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 stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of 

 

 

shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock
any shares of capital stock of the Company, then in each case the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event
and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

(b)                                Fundamental Transactions. 
If, at any time after the Initial Exercise Date, there shall occur any
capital reorganization or reclassification of the Common Stock (other than a
change in par value or a subdivision or combination as provided for in Section 3
(a) above), or any consolidation or merger of the Company with or into
another corporation, or a transfer of all or substantially all of the assets of
the Company, or the payment of a liquidating distribution, then, as part of any
such reorganization, reclassification, consolidation, merger, sale, or
liquidating distribution, lawful provision shall be made so that Holder shall
have the right thereafter to receive upon the exercise hereof (to the extent
still exercisable) the kind and amount of shares of stock or other securities
or property to which Holder would have been entitled to receive if, immediately
prior to any such reorganization, reclassification, consolidation, merger,
sale, or liquidating distribution, as the case may be, Holder had held the
number of shares of Common Stock which were then purchasable upon the exercise
of this Warrant. In any such case, appropriate adjustment (as reasonably
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of Holder such that the provisions set forth in this
paragraph (b) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant.

 

(c)                                 Calculations.  All calculations under this Section 3
shall be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.

 

(d)                                Notice to Holders. 
Whenever the Exercise Price is adjusted pursuant to this Section 3,
the Company shall promptly mail to each Holder a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.

 

Section 4.                                           Transfer of Warrant.

 

(a)                                 Transferability. 
Subject to Section 5(a) below, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.

 

 

(b)                                New Warrants. 
This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.

 

Section 5.                                           Miscellaneous.

 

(a)                                 Title to Warrant. 
Prior to the Termination Date and subject to compliance with applicable
laws and Section 4 of this Warrant, this Warrant and all rights hereunder
are transferable, in whole or in part, at the office or agency of the Company
by the Holder in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly
endorsed.

 

(b)                                No Rights as Shareholder Until Exercise. 
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the
surrender of this Warrant and the payment of the aggregate Exercise Price (or
by means of a cashless exercise), the Warrant Shares so purchased shall be and
be deemed to be issued to such Holder as the record owner of such shares as of
the close of business on the later of the date of such surrender or payment.

 

(c)                                 Loss, Theft, Destruction or Mutilation of
Warrant.  The Company covenants that upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

 

(d)                                Saturdays, Sundays, Holidays, etc. 
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday, Sunday
or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

(e)                                 Authorized Shares. 
The Company covenants that during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.

 

(f)                                   Governing Law; Jurisdiction. 
This Warrant will be governed by, and construed in accordance with, the
internal laws of the State of New York, without giving effect to the principles
of conflicts of law that would require the application of the laws of any other
jurisdiction. Any legal action, suit or proceeding arising out of or relating
to this Warrant or the transactions contemplated hereby shall only be
instituted, heard and adjudicated (excluding appeals) only in a state or
federal court located in New York, and each party hereto knowingly, voluntarily
and intentionally waives any objection which such party may now or hereafter
have to the laying of the venue of any such action, suit or proceeding, and
irrevocably submits to the exclusive personal jurisdiction of any such court in
any such action, suit or proceeding. Service of process in connection with any
such action, suit or proceeding may be served on 

 

 

each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Warrant.

 

(g)                                Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.

 

(h)                                Notices.  All notices,
requests, consents and other communications hereunder will be in writing, will
be mailed (a) if within the domestic United States by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile or (b) if delivered from outside
the United States, by International Federal Express or facsimile, and will be
deemed given (i) if delivered by first-class registered or certified mail
domestic, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii) if
delivered by International Federal Express, two business days after so mailed,
and (iv) if delivered by facsimile, upon electronic confirmation of
receipt and will be delivered and addressed as follows:

 

1.                                      if
to the Company, to:

 

Wave Systems Corp.

480 Pleasant Street

Lee, MA 01238

Fax: (413) 243-0391

ATTN: Gerard Feeney, CFO

 

with copies to:

 

Bingham McCutchen LLP

399 Park Avenue

New York, NY 10022

Fax: (212) 752-5378

ATTN: Neil W. Townsend

 

2.                                      if
to the Holder, at such address or addresses of the Holder as have been
furnished to the Company in writing.

 

(i)                                    Limitation of Liability. 
No provision hereof, in the absence of any affirmative action by Holder
to exercise this Warrant or purchase Warrant Shares, and no enumeration herein
of the rights or privileges of Holder, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

 

(j)                                    Remedies.  Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.

 

(k)                                 Successors and Assigns. 
Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and permitted assigns of
Holder. The provisions of this Warrant are intended 

 

 

to be for the benefit of all Holders from time to time
of this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.

 

(l)                                    Amendment.  This Warrant
may be modified or amended or the provisions hereof waived with the written
consent of the Company and the Holder.

 

(m)                              Severability. 
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.

 

(n)                                Headings.  The headings
used in this Warrant are for the convenience of reference only and shall not,
for any purpose, be deemed a part of this Warrant.

 

********************

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.

 

Dated: September     ,
2008.

 

	
   

  	
  WAVE
  SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerard T. Feeney

  
	
   

  	
   

  	
  CFO

  

 

 

NOTICE OF EXERCISE

 

TO:                           WAVE
SYSTEMS CORP.

 

(1)                                 The
undersigned hereby elects to purchase          Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

 

(2)                                 Payment
shall take the form of (check applicable box):

 

o                                   in
lawful money of the United States; or

 

o                                   the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

 

(3)                                 Please
issue a certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified below:

 

The Warrant Shares shall be delivered to the
following:

 

 

ASSIGNMENT FORM

 

(To assign the
foregoing warrant, execute this form and supply required information. Do not
use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

 

whose address is

 

Dated:

 

	
  Holders Signature:

  	
   

  	
   

  
	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
				

 

NOTE: The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant.

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