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Exhibit 4.1
Form of Warrant
COMMON STOCK PURCHASE WARRANT
To Purchase
[ ] Shares of
Class A Common Stock of
Date: December , 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 third 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 Nasdaq
Capital 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
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pursuant to the terms hereof. The Company
shall deliver an objection to any invalid Notice of
Exercise Form within 3 Trading Days of its receipt
thereof. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount
stated on the face hereof.
b)
Exercise Price . The exercise price of the Common
Stock under this Warrant shall be $0.28, subject to adjustment
hereunder (the " Exercise Price ").
c)
Cashless Exercise . 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 or any of such Holder’s affiliates), as set forth
on the applicable Notice of Exercise, would beneficially own in
excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of
shares of Common Stock benef
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