Exhibit 4.1
Form of
Warrant
COMMON STOCK PURCHASE
WARRANT
To Purchase
[
] Shares of Class A Common Stock of
Date:
October , 2008
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 the date hereof (the
“ Initial Exercise Date ”) and on or prior to
the fifth anniversary of the date hereof (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). This Warrant is being
issued pursuant to the terms of that certain Subscription
Agreement, of even date herewith (the “ Subscription
Agreement ”), among the Company and the
Holder.
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). The Holder shall be required to physically
surrender this Warrant to the Company when 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
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invalid Notice of Exercise
Form within 3 Trading Days of its receipt thereof. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.
b)
Exercise Price . The exercise price of the Common
Stock under this Warrant shall be $ 0.40, subject to
adjustment hereunder (the “ Exercise Price
”).
c)
Cashless Exercise . If at any time after one year from
the date of issuance of this Warrant there is no effective
registration statement registering, or no current prospectus
available for, 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 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).
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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. The Company and the Holder may also agree to make
arrangements for the delivery of the Warrant Shares, and the
payment of the aggregate Exercise Price, by means of
“DVP”.
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(d) 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
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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.
viii.
Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise . In addition to any other
rights available to the Holder, if the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an
open market 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.
e)
Exercise Limitations
.
i.
Holder’s Restrictions . The Company shall not
effect any exercise of this Warrant, and a Holder shall not have
the right to exercise any portion of this Warrant, pursuant to
Section 2 or otherwise, to the extent that after giving effect
to such issuance after exercise, such Holder (together with such
Holder’s affiliates, and any other person or entity acting as
a group together with such
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Holder o
