Exhibit 10.1

 

SUBSCRIPTION AGREEMENT

 

December 24, 2008

 

Wave Systems Corp.
480 Pleasant Street
Lee, MA 01238

 

The undersigned (the “Investor”) hereby confirms its agreement with you as
follows:

 

1.                                      This Subscription Agreement (this
“Agreement”) is made as of the date set forth below between Wave Systems Corp.,
a Delaware corporation (the “Company”), and the Investor.

 

2.                                      The Company has authorized the sale and
issuance to certain investors of (a) up to 456 shares of Series K Convertible
Preferred Stock (the “Total Shares”), par value $0.01 per share (the “Series K
Preferred Stock”) for a purchase price of $2,800 per share (the “Purchase
Price”) and (b) warrants, in substantially the form attached hereto as Annex II
(the “Warrants” and, collectively, with the Total Shares, the “Securities”), to
purchase up to 1,140,000 shares of Class A Common Stock of the Company, par
value $0.01 per share (the “Common Stock”) at an exercise price of $0.28 per
share (the “Exercise Price”).  Investors will be issued Warrants to purchase
2,500 shares of Common Stock for each share of Series K Preferred Stock
purchased by such Investor.  The terms of the Series K Preferred Stock will be
set forth in the Certificate of Designations substantially in the form attached
hereto as Annex III (the “Certificate of Designations”).

 

3.                                      The offering and sale of the Securities
(the “Offering”) are being made pursuant to the Company’s registration statement
including a base prospectus (the “U.S. Base Prospectus”) on Form S-3
(Registration No. 333-150340) filed with the United States Securities and
Exchange Commission (the “Commission”) (which, together with all amendments or
supplements thereto is referred to herein as the “Registration Statement”) and a
Prospectus Supplement containing certain supplemental information regarding the
Securities and terms of the Offering that will be filed with the Commission (the
“Prospectus Supplement”).

 

4.                                      The Company and the Investor agree that
the Investor will purchase from the Company and the Company will issue and sell
to the Investor, for the aggregate purchase price set forth below, (a) the
number of shares of Series K Preferred Stock set forth below (the “Investor
Shares”) and (b) a Warrant to purchase the number of shares of Common Stock set
forth below (the “Investor Warrant” and, collectively with the Investor Shares,
the “Investor Securities”).  The Investor Securities shall be purchased pursuant
to the Terms and Conditions for Purchase of Securities attached hereto as Annex
I and incorporated herein by this reference as if fully set forth herein.

 

5.                                      The Investor represents that, except as
set forth below, (a) it has had no position, office or other material
relationship within the past three years with the Company or

 

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any of its affiliates and (b) it has no direct or indirect affiliation or
association with any NASD member.  Exceptions:

 

 

(If no exceptions, write “none.” If left blank, response will be deemed to be
“none.”)

 

6.                                      The Investor acknowledges that, prior to
or in connection with the execution and delivery of this Agreement, it has
reviewed the final U.S. Base Prospectus, dated June 23, 2008, which is a part of
the Company’s Registration Statement, and the Prospectus Supplement.  THIS
AGREEMENT SHALL NOT CONSTITUTE A BINDING COMMITMENT ON THE PART OF THE COMPANY
UNTIL (A) THE COMPANY HAS TIMELY RECEIVED AN EXECUTED COPY OF THE COMPLETED
SUBSCRIPTION AGREEMENT FROM THE INVESTOR AND (B) THE COMPANY HAS DELIVERED TO
THE INVESTOR AN EXECUTED COUNTERPART SIGNATURE PAGE HERETO.  THE INVESTOR
ACKNOWLEDGES THAT, AT ANY TIME PRIOR TO THE DELIVERY OF ITS EXECUTED
COUNTERPART SIGNATURE PAGE, THE COMPANY MAY ELECT TO NOT ENTER INTO THIS
SUBSCRIPTION AGREEMENT FOR ANY REASON.

 

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SIGNATURE PAGE

 

Number of Investor Shares:                    

 

Price Per Investor
Share:                                                              $2,800

 

Aggregate Purchase Price:                       

 

Shares of Common Stock issuable upon exercise of Investor
Warrant:                            

 

Exercise Price of Investor Warrant:        $0.28

 

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

 

Dated as of: December 24, 2008

 

 

 

 

 

INVESTOR

 

 

 

By:

 

 

Print Name:

 

 

Title:

 

 

Address:

 

 

 

 

 

 

 

 

Phone #:

 

 

Email:

 

 

 

Agreed and Accepted

 

December 24, 2008:

 

 

 

WAVE SYSTEMS CORP.

 

 

 

By:

 

 

Name: Gerard T. Feeney

 

Title:   CFO

 

 

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EXHIBIT A

 

WAVE SYSTEMS CORP.

 

INVESTOR QUESTIONNAIRE

 

Pursuant to Section 3 of Annex I to this Agreement, please provide us with the
following information:

 

1.

The exact name that your Investor Shares and Warrant are to be registered in.
You may use a nominee name if appropriate:

 

 

2.

The relationship between the Investor and the registered holder listed in
response to item 1 above:

 

 

3.

The mailing address of the registered holder listed in response to item 1 above:

 

 

4.

The Social Security Number or Tax Identification Number of the registered holder
listed in response to item 1 above:

 

 

5.

The mailing address to which the Investor Share certificate and Warrant should
be delivered:

 

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ANNEX I

 

TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES

 

All capitalized terms not otherwise defined in this Annex I shall have the
meanings ascribed thereto in the Subscription Agreement to which this Annex I is
attached.

 

1.                                      Authorization and Sale of the Investor
Securities.  Subject to the terms and conditions of this Agreement, the Company
has authorized the sale of the Investor Securities.

 

2.                                      Agreement to Sell and Purchase the
Investor Securities; Placement Agent.

 

2.1.                            At the Closing (as defined in Section 3.1), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions set forth herein, the number of Investor
Shares and corresponding Investor Warrants set forth on the last page of the
Subscription Agreement to which these Terms and Conditions for Purchase of
Investor Securities are attached as Annex I (the “Signature Page”) for the
aggregate purchase price therefor set forth on the Signature Page.

 

2.2.                            The Company proposes to enter into substantially
this same form of Subscription Agreement with certain other investors (the
“Other Investors”) and expects to complete sales of some or all of the remaining
Securities to them as part of the Offering (subject to Section 3.2(b) below). 
The Investor and the Other Investors are hereinafter sometimes collectively
referred to as the “Investors”.  The Company may complete sales of the remaining
Securities in this Offering to certain of the Other Investors without requiring
such Other Investors to enter into a Subscription Agreement; such sales shall
nevertheless be on the same price terms as the price terms for all of the other
sales in the Offering.

 

2.3.                            The Investor acknowledges that the Company
intends to pay Security Research Associates, Inc. (the “Placement Agent”) a fee
(the “Placement Fee”) in respect of the sale of the Securities to the Investor
pursuant to a Placement Agency Agreement (the “Placement Agreement”) with the
Placement Agent.  A copy of the Placement Agreement is available to the Investor
upon request.

 

3.                                      Closings and Delivery of the Securities
and Funds.

 

3.1.                            Closing.  The completion of the purchase and
sale of the Securities (the “Closing”) will occur on or before December 30, 2008
(the “Closing Date”).  At the Closing: (a) the Company will deliver (by
overnight courier) a certificate representing the number of shares of Series K
Preferred Stock set forth on the Signature Page registered in the name of the
Investor or, if so indicated on the Investor Questionnaire attached to the
Subscription Agreement as Exhibit A, in the name of a nominee designated by the
Investor, (b) the Company will deliver (by overnight courier) a Warrant to
purchase the number of shares of Common Stock set forth on the Signature
Page registered in the name of the Investor or, if so indicated on the Investor
Questionnaire attached to the Subscription Agreement as Exhibit A, in the name
of a nominee designated by the Investor and (c) the aggregate purchase price for
the Investor Securities being purchased by the Investor will be paid by or on
behalf of the Investor to the Company by wire

 

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transfer of immediately available funds to the account set forth on Annex IV
hereto the aggregate purchase price for the Investor Securities being purchased
by the Investor hereunder.

 

3.2.                            (a)                                  Conditions
to the Company’s Obligations.  The Company’s obligation to issue the Investor
Securities to the Investor will be subject to (i) the receipt by the Company of
the aggregate purchase price for the Investor Securities being purchased
hereunder as set forth on the Signature Page, (ii) the accuracy of the
representations and warranties made by the Investor in this Agreement, (iii) the
fulfillment of those undertakings of the Investor to be fulfilled prior to the
Closing Date, (iv) the Registration Statement remaining in effect and no stop
order proceedings with respect thereto being pending or threatened, and
(v) there being no objections raised by the staff of the NASDAQ Stock Market to
the consummation of the sale without the approval of the Company’s stockholders.

 

(b)                                 Conditions to the Investor’s Obligations. 
The Investor’s obligation to purchase the Investor Securities will be subject to
(i) the filing by the Company of the Certificate of Designations with the
Secretary of State of the State of Delaware, substantially in the form attached
hereto as Annex III and (ii) the fulfillment of those other undertakings of the
Company with respect to the Investor Securities and/or the Investor to be
fulfilled prior to the Closing Date.  The Investor’s obligations are expressly
not conditioned on the purchase by any or all of the Other Investors of the
remaining Securities that they have agreed to purchase from the Company.

 

4.                                      Representations, Warranties and
Covenants.

 

4.1.                            Representations, Warranties and Covenants of the
Investor.

 

(a)                                  The Investor represents and warrants to,
and covenants with, the Company that: (i) the Investor is knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions with
respect to, investments in shares presenting an investment decision like that
involved in the purchase of the Investor Securities, including investments in
securities issued by the Company and investments in comparable companies, and
has requested, received, reviewed and considered all information it deemed
relevant in making an informed decision to purchase the Investor Securities;
(ii) the Investor has answered all questions on the Signature Page for use in
the Prospectus Supplement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; and (iii) the
Investor, in connection with its decision to purchase the number of Investor
Securities set forth on the Signature Page, is relying only upon the U.S. Base
Prospectus, the Prospectus Supplement and the documents incorporated by
reference therein.

 

(b)                                 The Investor acknowledges, represents and
agrees that no action has been or will be taken in any jurisdiction outside the
United States by the Company or the Placement Agent that would permit an
offering of the Investor Securities, or possession or distribution of offering
materials in connection with the issue of the Investor Securities, in any
jurisdiction outside the United States where action for that purpose is
required.  The Investor, if outside the United States, will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Investor Securities or has in its
possession or distributes any offering material, in all cases at its own
expense.  The Placement Agent is not

 

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authorized to make and has not made any representation or use of any information
in connection with the issue, placement, purchase and sale of the Investor
Securities, except as set forth or incorporated by reference in the U.S. Base
Prospectus or the Prospectus Supplement.

 

(c)                                  The Investor further represents and
warrants to, and covenants with, the Company that: (i) the Investor has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement;
and (ii) this Agreement constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

(d)                                 The Investor understands that nothing in
this Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Investor Securities constitutes legal, tax or
investment advice.  The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Investor Securities.

 

(e)                                  The Investor acknowledges that the shares
of Common Stock acquired upon the exercise of the Investor Warrant or the
conversion of the Investor Shares, if not registered, will have restrictions on
resale imposed by state and federal securities laws.

 

(f)                                    The Investor represents, warrants and
agrees that, since the earlier to occur of (i) the date on which either
Placement Agent first contacted the Investor about the Offering and (ii) the
date that is the tenth (10th) trading day prior to the date of this Agreement,
it has not directly or indirectly (x) engaged in any short selling,
(y) established or increased any “put equivalent position” as defined in
Rule 16(a)-1(h) under the Securities Exchange Act of 1934 or (z) granted any
option for the purchase of or entered into any hedging or similar transaction
with the same economic effect as a short sale, in each case with respect to the
Company’s securities.

 

5.                                      Survival of Representations, Warranties
and Agreements.  Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Investor herein will survive the execution of this Agreement,
the delivery to the Investor of the Investor Securities being purchased and the
payment therefor.

 

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

 

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business days after so mailed, and (iv) if delivered by facsimile, upon
electronic confirmation of receipt and will be delivered and addressed as
follows:

 

(a)                                  if to the Company, to:

 

WaveSystemsCorp.
480PleasantStreet
Lee,MA01238
Fax:(413)243-0391
ATTN:  Gerard T. Feeney, CFO

 

with copies to:

 

BinghamMcCutchenLLP
399ParkAvenue
NewYork,NY10022
Fax:(212)752-5378
ATTN:  Neil W. Townsend

 

(b)                                 if to the Investor, at its address on the
Signature Page hereto, or at such other address or addresses as may have been
furnished to the Company in writing.

 

7.                                      Changes.  This Agreement shall not be
modified or amended except pursuant to an instrument in writing signed by the
Company and the Investor.

 

8.                                      Headings.  The headings of the various
sections of this Agreement have been inserted for convenience of reference only
and will not be deemed to be part of this Agreement.

 

9.                                      Severability.  In case any provision
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby.

 

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

 

11.                               Counterparts.  This Agreement may be executed
in two or more counterparts, each of which will constitute an original, but all
of which, when taken together, will constitute but one instrument, and will
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.

 

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12.                               Confirmation of Sale.  The Investor
acknowledges and agrees that such Investor’s receipt of the Company’s
counterpart to this Agreement shall constitute written confirmation of the
Company’s sale of Investor Securities to such Investor.

 

13.                               Entire Agreement.  This Agreement and the
Warrant constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings between such parties with respect to such subject matter.

 

14.                               No Assignment.  This Agreement shall not be
assigned by any party hereto, without the express prior written consent of the
Company or the Investor.

 

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ANNEX IV

 

Company Wire Instructions

 

In accordance with section 3.1(b) of the terms and conditions attached hereto as
Annex I, remit by wire transfer the amount of funds equal to the aggregate
purchase price for the shares being purchased by the investor to the following
account:

 

Wire info for:  Wave Systems Corp

 

480 Pleasant Street

 

Lee, MA 01238

 

 

Account:  Wave Systems Corp

 

HSBC Bank

 

452 Fifth Avenue

 

New York, NY 10018

 

 

Bank ABA/Routing #  021001088

 

US Govt MM Fund:  610185055

 

Contact:  Will Aquino / Phone:  212-525-8859   / Fax: 212-525-8924

 

International Transactions:  Use Swift #   MRMDUS33

 

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