Document:

EXHIBIT
10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
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.  THIS SECURITY AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase
             Shares
of Common Stock of

 

Wave Systems Corp.

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
CERTIFIES that, for value received,
              
(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 November    , 2003 (the “Initial Exercise
Date”) and on or prior to the close of business on the third anniversary of
the Initial Exercise Date (the “Termination Date”) but not thereafter
(the “Exercise Period”), to subscribe for and purchase from Wave Systems Corp.,
a corporation incorporated in Delaware (the “Company”), up to
               
shares (the “Warrant Shares”) of Common Stock, par value $0.01 per
share, of the Company (the “Common Stock”).  The purchase price of one share of Common Stock (the “Exercise
Price”) under this Warrant shall be
$              
(1), subject to adjustment hereunder. 
The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated November   , 2003,
between the Company and the purchasers signatory thereto.

 

(1)           110% of the average of the five VWAPs for the five Trading
Days immediately prior to the Closing Date.

 

1

 

1.               Title to Warrant. 
Prior to the Termination Date and subject to compliance with applicable
laws and Section 7 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.  The transferee shall sign an
investment letter in form and substance reasonably satisfactory to the Company.

 

2.               Authorization of Warrant Shares. 
The Company represents and warrants 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).

 

3.               Exercise of Warrant.

 

(a)               Except as provided in Section 4
herein, exercise of the purchase rights represented by this Warrant may be made
at any time or times on or after the Initial Exercise Date and on or before the
Termination Date by the surrender of this Warrant and the Notice of Exercise
Form annexed hereto duly executed, at the office of the Company (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) and upon payment of the Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check drawn on a United States bank or by means
of a cashless exercise pursuant to Section 3(d), the Holder shall be entitled
to receive a certificate for the number of Warrant Shares so purchased.  Certificates for shares purchased hereunder
shall be delivered to the Holder within five (5) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. This Warrant shall
be deemed to have been exercised and such certificate or certificates 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, pursuant to Section 5 prior to the issuance of such
shares, have been paid.  If the Company
fails to deliver to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 3(a) by the fifth Trading Day
after the date of exercise, then the Holder will have the right to rescind such
exercise.  In addition to any other
rights available to the Holder, if the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to an
exercise by the fifth Trading Day after the date of exercise and the Holder has
not rescinded such exercise pursuant to this Section 3(a), and if after
such fifth Trading Day the Holder is required by its broker to purchase (in an
open market

 

2

 

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 times (B) the price at which the sell
order giving rise to such purchase obligation was executed, 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.  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. 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.

 

(b)              If this Warrant shall have been
exercised in part, the Company shall, 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.

 

(c)               The Company shall not effect any
exercise of this Warrant, and the Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 3(a) or otherwise, to the
extent that after giving effect to such issuance after exercise, the Holder
(together with the Holder’s affiliates), as set forth on the applicable Notice
of Exercise, would beneficially own in excess of 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
issuance.  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its
affiliates and (B)

 

3

 

exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or any of
its affiliates.  Except as set forth in
the preceding sentence, for purposes of this Section 3(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act.  To the extent that the
limitation contained in this Section 3(c) applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by
the Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of such Holder, and the submission of a Notice of Exercise
shall be deemed to be such Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of which
portion of this Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. 
For purposes of this Section 3(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral
request of the Holder, the Company shall within two Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The provisions of this Section 3(c) may be waived by the
Holder upon, at the election of the Holder, not less than 61 days’ prior notice
to the Company, and the provisions of this Section 3(c) shall continue to
apply until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).

 

(d)              If at any time after one year from
the date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder, then this
Warrant may also be exercised at such time 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 Closing Price on the Trading Day
immediately preceding the date of such election;

 

(B) = 
the Exercise Price of the Warrants, as adjusted; and

 

4

 

(X) = the number of Warrant Shares issuable
upon exercise of this Warrant in accordance with the terms of this Warrant.

 

4.               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.

 

5.               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.

 

6.               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.

 

7.               Transfer, Division and Combination.

 

(a)               Subject to compliance with any
applicable securities laws and the conditions set forth in Sections 1 and 7(f)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
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)              Subject to 7(e) below, 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

 

5

 

agent or attorney.  Subject to compliance with
Section 7(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.

 

(c)               Subject to 7(e) below, the Company
shall prepare, issue and deliver at its own expense (other than transfer taxes)
the new Warrant or Warrants under this Section 7.

 

(d)              The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of transfer
of the Warrants.

 

(e)               If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities or
blue sky laws, the Company may require, as a condition of allowing such
transfer (i) that the Holder or transferee of this Warrant, as the case may be,
furnish to the Company a written opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a
qualified institutional buyer as defined in Rule 144A(a) under the Securities
Act.

 

8.               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.

 

9.               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.

 

10.         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

 

6

 

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.

 

11.         Adjustments of Exercise Price and Number of Warrant
Shares.  The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the following.  In case the Company shall (i) pay a dividend
in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, or (iv)
issue any shares of its capital stock in a reclassification of the Common
Stock, then the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of Warrant Shares or other securities
of the Company which it would have owned or have been entitled to receive had
such Warrant been exercised in advance thereof.  Upon each such adjustment of the kind and number of Warrant
Shares or other securities of the Company which are purchasable hereunder, the
Holder shall thereafter be entitled to purchase the number of Warrant Shares or
other securities resulting from such adjustment at an Exercise Price per
Warrant Share or other security obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment.  An adjustment
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.

 

12.         Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets.  In case the
Company shall reorganize its capital, reclassify its capital stock, consolidate
or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, shares of
common stock of the successor or acquiring corporation, or any cash, shares of stock
or other securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then
the Holder shall have the right thereafter to receive, at the option of the
Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event or (b) cash equal to the
value of this Warrant as determined in accordance with the Black-Scholes option
pricing formula.  In case of any such
reorganization, reclassification, merger,

 

7

 

consolidation or disposition of assets, the successor or
acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12.  For purposes of this Section 12,
“common stock of the successor or acquiring corporation” shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock.  The
foregoing provisions of this Section 12 shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.

 

13.         Voluntary Adjustment by the Company. 
The Company may at any time during the term of this Warrant reduce the
then current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.

 

14.         Notice of Adjustment. 
Whenever the number of Warrant Shares or number or kind of securities or
other property purchasable upon the exercise of this Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall give notice thereof to
the Holder, which notice shall state the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.

 

15.         Notice of Corporate Action. 
If at any time:

 

(a)               the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or

 

(b)              there shall be any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company
with, or any sale, transfer or other disposition of all or substantially all
the property, assets or business of the Company to, another corporation or,

 

8

 

(c)               there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder
(i) at least 10 days’ prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 10 days’ prior written notice of the date when the same shall take
place.  Such notice in accordance with
the foregoing clause also shall specify (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, the
date on which the holders of Common Stock shall be entitled to any such
dividend, distribution or right, and the amount and character thereof, and (ii)
the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their Warrant Shares
for securities or other property deliverable upon such disposition, dissolution,
liquidation or winding up.  Each such
written notice shall be sufficiently given if addressed to Holder at the last
address of Holder appearing on the books of the Company and delivered in
accordance with Section 18(d).

 

16.         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.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of  the Trading Market
upon which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of

 

9

 

this Warrant, and (c) use commercially reasonable efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to
perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

 

17.         Call.  At any time
and from time to time following the Effective Date, the Company shall have the
right, upon 15 Business Days’ prior written notice to the Holder (“Call
Notice”), to call all or any portion of this Warrant at a price equal to $.05
per Warrant at any time, provided that (i) the Warrant Shares are registered
for resale pursuant to the Securities Act and have been for at least the
20-Trading Day period preceding the Call Notice and remains effective through
the effective date of the Call, (ii) the VWAP of the Common Stock on a Trading
Market is equal to or greater than $[200% of the average of the five VWAPs for
the five Trading Days immediately prior to the Closing Date] (subject to
adjustment to reflect forward or reverse stock splits, stock dividends,
recapitalizations and the like)(the “Threshold Price”) for each of at least 5
consecutive Trading Days following the Effective Date, and (iii) the Call
Notice is delivered within 3 Business Days’ of the most recent day in the previous
clause (ii) that the Common Stock equaled or exceeded the Threshold Price for
at least five consecutive Trading Days. 
At any time prior to the effective date of such call, the Holder shall
have the right to exercise this Warrant in accordance with its terms.

 

18.         Miscellaneous.

 

(a)               Jurisdiction. 
This Warrant shall constitute a contract under the laws of New York,
without regard to its conflict of law, principles or rules.

 

(b)              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.

 

(c)               Nonwaiver and Expenses. 
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all
rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover
any costs and expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.

 

10

 

(d)              Notices. 
Any notice, request or other document required or permitted to be given
or delivered to the Holder by the Company shall be delivered in accordance with
the notice provisions of the Purchase Agreement.

 

(e)               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.

 

(f)                 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.

 

(g)              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.

 

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

 

(i)                  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.

 

(j)                  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.

 

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

 

11

 

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

 

	
  Dated: 
  November     , 2003

  	
   

  
	
   

  	
   

  
	
   

  	
  WAVE SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

12

 

NOTICE OF EXERCISE

 

	
  To:

  	
   

  	
  Wave Systems Corp.

  

 

(1)   The undersigned hereby
elects to purchase
             
Warrant Shares of Wave Systems Corp. 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 3(d), to exercise
  this Warrant with respect to the maximum number of Warrant Shares purchasable
  pursuant to the cashless exercise procedure set forth in subsection 3(d).

  

 

(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:

 

                                              

 

                                              

 

                                              

 

(4)   Accredited
Investor/Qualified Institutional Buyer. 
The undersigned is either: (i) an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended.

 

	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
						

 

13

 

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:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  
	
  Holder’s 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.

 

14EXHIBIT 10.3

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration
Rights Agreement (this “Agreement”) is made and entered into as of
November     , 2003, among Wave Systems Corp., a
Delaware corporation (the “Company”), and the purchasers’ signatory hereto (each
such purchaser is a “Purchaser” and all such purchasers are, 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 following meanings:

 

“Effectiveness
Date” means, with respect to the Registration Statement registering for
resale the Registrable Securities, the 90th calendar day following the Closing
Date; provided, however, in the event that the Company is notified by the
Commission that the above Registration Statement will not be reviewed or is no
longer subject to further review and comments, the Effectiveness Date as to the
Registration Statement shall be the fifth Trading Day following the date on
which the Company is so notified if such date precedes the dates required
above.

 

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

 

“Filing Date” means, with respect to the Registration Statement
registering for resale the Registrable Securities, the 30th day following the
Closing Date.

 

“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).

 

“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 the Registration
Statement (including, without limitation, a prospectus that includes any
information previously

 

1

 

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 all of the Shares, the Warrant
Shares, shares of Common Stock issuable upon exercise of the warrants issued to
J.P. Carey or its designees in connection with the transactions contemplated by
the Purchase Agreement together with any shares of Common Stock issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.

 

“Registration Statement” means the registration statements
required to be filed hereunder, including (in each case) the Prospectus,
amendments and supplements to the 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
the registration statement.

 

“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 purpose and effect as such Rule.

 

“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 purpose and effect as such Rule.

 

“Warrants” shall mean the Common Stock purchase warrants issued to
the Purchasers pursuant to the Purchase Agreement.

 

2.                                       Registration

 

(a)                                  On
or prior to the Filing Date, the Company shall prepare and file with the
Commission the Registration Statement covering the resale of all of the
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (unless
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 (unless otherwise
directed by the Holders and except to the extent the Company determines that
modifications thereto are required under applicable law) substantially the
“Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the Company shall use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as possible after the filing

 

2

 

thereof, but in any event
prior to 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 two 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”). The Company shall notify the Holders via
facsimile within one (1) Trading Day of the effectiveness of the Registration
Statement on the same day that the Company receives notification of the
effectiveness from the Commission.

 

(b)                                 If:
(i) the Registration Statement is not filed on or prior to its 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),
the Company shall not be deemed to have satisfied clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that the Registration Statement will
not be “reviewed,” or not subject to further review, or (iii) prior to the Effectiveness
Date, the Company fails to file a pre-effective amendment and otherwise respond
in writing to comments made by the Commission in respect of the Registration
Statement within 10 Trading Days after the receipt of comments by or notice
from the Commission that such amendment is required in order for the
Registration Statement to be declared effective, or (iv) the Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission by the Effectiveness Date, or (v) after the Effectiveness Date,
the Registration Statement ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the Prospectus therein to
resell such Registrable Securities for 10 consecutive Trading Days or in any
individual case an aggregate of 15 Trading Days during any 12 month period
(which need not be consecutive Trading Days) (any such failure or breach being
referred to as an “Event”, and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 Trading Day period is exceeded, or for purposes of clause (v) the
date on which such 10 or 15 Trading Day period, as applicable, is exceeded
being referred to as “Event Date”), then, on each such Event Date and every
monthly anniversary thereof until the applicable Event is cured, the Company
shall pay to each Holder an amount in cash, as liquidated damages and not as a
penalty, equal to 2.0% per month of (i) the Subscription Amount paid by such
Holder pursuant to the Purchase Agreement for Registrable Securities then held
by such Holder and covered (or to be covered) by the Registration Statement,
and (ii) if the Warrants are “in the money” and then held by the Holder, the
value of any outstanding Warrants (valued at the difference between the average
Closing Price during the applicable month and the Exercise Price multiplied by
the number of shares of Common Stock the Warrants are exercisable into).

 

3

 

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
15% 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. The liquidated damages pursuant to the terms hereof shall apply on a
pro-rata basis for any portion of a month prior to the cure of an Event.

 

3.                                       Registration
Procedures

 

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

 

(a)                                  Not
less than five Trading Days prior to the filing of the Registration Statement
or any related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to each Holder copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of
such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act. 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 shall reasonably and in good faith object, provided, the
Company is notified of such objection in writing no later than 3 Trading Days
after the Holders have been so furnished copies of such documents.

 

(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 cause the Registration Statement to become
effective and to keep the Registration Statement continuously effective as to
the applicable Registrable Securities for the Effectiveness Period; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), 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 10 Trading 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
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 (subject to
the terms of this Agreement) 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.

 

4

 

(c)                                  Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (ii) through (vi) hereof, shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been made)
as promptly as reasonably possible and (if requested by any such Person)
confirm such notice in writing no later than two Trading Days 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 the Registration
Statement and whenever the Commission comments in writing on the 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; (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;
and  (vi) the occurrence or existence of
any pending corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the Company, makes
it not in the best interest of the Company to allow continued availability or
the Registration Statement or Prospectus; provided that the Company shall not
disclose the nature of such information to the Holder.

 

(d)                                 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 reasonably requested. Subject to the terms of this
Agreement, the Company hereby consents to 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.

 

(e)                                  Use
commercially reasonable efforts to register or qualify the resale of such
Registrable Securities as required under applicable securities or Blue Sky laws
of each State within the United States as any Holder requests in writing, to
keep each the Registration or qualification (or exemption therefrom) effective
during the

 

5

 

Effectiveness Period;
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.

 

(f)                                    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.

 

(g)                                 Upon
the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances 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. If the Company notifies the Holders in accordance with clauses
(ii) through (vi) of Section 3(c) above to suspend the use of the use of
any Prospectus until the requisite changes to such Prospectus have been made,
or the Company otherwise notifies the Holders of its election to suspend the
availability of the Registration Statement and Prospectus pursuant to clause
(vi) of Section 3(c), then the Holders shall suspend use of such
Prospectus.  The Company will use its
best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable, except that in the case of suspension of the availability of
the Registration Statement and Prospectus pursuant to clause (vi) of
Section 3(c), the Company shall not be required to take such action until
such time as it shall determine that the continued availability of the Registration
Statement and Prospectus is no longer not in the best interests of the
Company.  The Company shall be entitled
to exercise its right under this Section 3(g) to suspend the availability
of the Registration Statement and Prospectus, subject to the payment of
liquidated damages pursuant to Section 2(b), for a period not to exceed 60
consecutive days or for multiple periods not to exceed 90 days in any 12 month
period.

 

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

 

(i)                                     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.

 

(j)                                     The
Company may require, at any time prior to the third Trading Day prior to the
Filing Date, each Holder to furnish to the Company a statement as to the number
of shares of Common Stock beneficially owned by such Holder and, if requested

 

6

 

by the Commission, the
controlling person thereof, within three Trading Days of the Company’s
request.  During any periods that the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the Company’s request,
any liquidated damages that are accruing at such time shall be tolled, until
such information is delivered to 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 the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection
with Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment under
the laws of such jurisdictions as requested by the Holders)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, and (v) 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. In no event shall the Company be responsible for any broker or
similar commissions or, except to the extent provided for in the Transaction
Documents, any legal fees or other costs of the Holders.

 

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, brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), 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, 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

 

7

 

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 or alleged 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
or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(vi), 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(e). The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding
arising from or in connection with the transactions contemplated by this
Agreement of which the Company is aware.

 

(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 determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising out of or based upon 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: (i) such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act or (ii) 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, such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions are
based upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent 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
or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(vi), 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(e). In no event shall the liability
of any selling Holder

 

8

 

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 such failure shall have
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; or (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 material 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 the expense of one such counsel for each Holder 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.

 

Subject to the terms of this Agreement, 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
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

 

9

 

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)                                  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 all of
the Holders 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 Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of all of the Registrable Securities to which

 

10

 

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

 

(b)                                 No Inconsistent Agreements . Neither the
Company nor any of its subsidiaries has entered, as of the date hereof, nor
shall the Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities, that would have the
effect of impairing the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  Except as set forth on Schedule 6(b), neither the Company
nor any of its subsidiaries has previously entered into any agreement granting
any registration rights with respect to any of its securities to any Person
that have not been satisfied in full.

 

(c)                                  No Piggyback on Registrations.  Except as and to the extent specified in
Schedule 6(c) 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.

 

(d)                                 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.

 

(e)                                  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 Sections 3(c)(ii), (iii)
or (vi), 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
contemplated by Section 3(g), 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. The
Company agrees and acknowledges that any periods during which the Holder is
required to discontinue the disposition of the Registrable Securities hereunder
shall be subject to the provisions of Section 2(b).

 

(f)                                    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 the 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

 

11

 

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 the
Registration statement all or any part of such Registrable Securities such holder
requests to be registered; provided, that, the Company shall not be required to
register any Registrable Securities pursuant to this Section 6(f) that are
eligible for resale pursuant to Rule 144(k) promulgated under the Securities
Act or that are the subject of a then effective Registration Statement..

 

(g)                                 Notices. 
Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the
Purchase Agreement.

 

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

 

(i)                                     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 hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, 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 suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof 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

 

12

 

any provisions of this
Agreement, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its attorneys 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 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)                                 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.

 

(o)                                 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.

 

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

 

13

 

IN WITNESS
WHEREOF, the parties have executed this Registration

 

Rights Agreement as of the date first written
above.

 

 

	
   

  	
  WAVE SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE OF HOLDERS
FOLLOWS]

 

14

 

[SIGNATURE PAGE OF HOLDERS TO RRA
-WAVX]

 

 

	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE OF HOLDERS
FOLLOWS]

 

15

 

[SIGNATURE PAGE OF HOLDERS TO
RRA- WAVX]

 

 

	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

16

 

Plan
of Distribution

 

The selling stockholders and any of their pledgees,
assignees 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;

 

•                                          settlement of short sales crated after the
date of this Prospectus;

 

•                                          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 stockholder may from time to time
pledge or grant a security interest in some or all of the Shares or common
stock or Warrant owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
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

 

17

 

provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee 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 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.  The selling
stockholders have informed the Company that none of them 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 incurred by the
Company 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

 

SCHEDULE 6(c)

 

The holders of the Company’s Series H
Convertible Preferred Stock may include the shares of the Company’s Common
Stock issuable upon conversion or exercise of their Series H Convertible
Preferred Stock and related Warrants if at any time there is not an effective
registration statement covering such Common Stock.  An effective registration statement currently covers such Common
Stock.

 

Sandra West holds multiple warrants
exercisable for an aggregate of 44,365 shares of Common Stock which were
granted to her as payment for services performed for the Company.  Each warrant grants her the right to be
included on the Registration Statement. 
He shares of Common Stock issuable upon exercise of her warrants will be
included in the Registration Statement.

 

19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}]]