EXHIBIT 10.27

ADDENDUM NO. 1 TO

AUTHORIZED DISTRIBUTOR AGREEMENT

This Addendum supplements and modifies the Authorized Distributor Agreement with
an Effective Date of June 29, 2004 between Envoy Data Inc. (“Distributor”) and
Wave Systems Corp. (“Wave Systems”).

1.    Background.   Dell Inc. has entered into an arrangement with Distributor
under which Distributor distributes third-party software authorized by Dell to
be distributed with or for Dell computers. Wave Systems has obtained approval
from Dell for certain of its software products to be distributed with or for
Dell computers. This Addendum contains the terms and conditions under which
Distributor will distribute such software of Wave Systems. Except as otherwise
specifically mentioned, this Addendum shall only apply to the distribution of
Wave Systems’ Security Products as defined below.

2.    Definitions.   In addition to the definitions in the Authorized
Distributor Agreement the following definitions shall apply to this Addendum.

“Client Product” means the Product designated as Client Product in Attachment 1
hereto.

“Dell” means Dell Inc. and its subsidiaries.

“Distributor Agreement” means the Authorized Distributor Agreement, referenced
above, which this Addendum supplements.

“End User” means a person or entity that acquires Security Products for its own
use and not for resale or distribution.

“Gold Master” means a CD-ROM which contains a copy of the Client Product in
object-code form, a click-through End User license agreement, and a readme
electronic file containing installation and use instructions and links for
on-line help. Such Gold Master will be suitable for use in making copies of the
Client Product and such associated text files.

“Security Products” refers to both the Client Product and the Server Product.

“License Management Codes”  means unique numbers which can be assigned to a copy
of software equipped with the License Management Tool to prevent copying of that
copy of the software.

“License Management Tool” means software designed to prevent unauthorized
copying of software.

“Server Product” means the Product designated in Attachment 1 as Server Product.

3.    Distribution of Security Products.

a.           Distributor is hereby authorized by Wave Systems to distribute the
Security Products solely to Dell and to End Users in accordance with the terms
of the Distributor Agreement as supplemented and modified by this Addendum.

b.           Promptly after full execution of this Addendum, Wave Systems will
deliver to Distributor a Gold Master for the Client Product, the License
Management Tool, a quantity of License Management Codes as determined by Wave
Systems, artwork for CD-ROM sleeves, and artwork for CD-ROM disks.

c.           Distribution of the Client Product may be accomplished via the
Internet electronic network and via CD-ROMs. Distribution of the Server Product
may be accomplished only via CD-ROMs which will be provided by Wave Systems
pursuant to purchase orders placed by Distributor.

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d.           All Security Products distributed by Distributor must include an
operating copy of the License Management Tool and License Management Code, both
of which will be provided and paid for by Wave Systems. Wave Systems will
periodically supply Distributor with additional License Management Codes as
needed. Distributor will not directly or indirectly attempt to disable or bypass
the License Management Tool or the embedded End User license agreement.

e.           Distributor may arrange for competent and reliable contractors to
replicate the Client Product from the Gold Master to CD-ROMs for distribution
hereunder provided (i) Distributor has entered into Replication Services
Agreement with such contractors, (ii) Distributor has promptly provided a copy
of such executed agreements to Wave Systems, and (iii) Distributor promptly
ceases doing business with any contractor who violates the terms of such
agreements.

4.    Submission of Orders.

a.           Upon execution of this Agreement and on or before January 1 of each
year during the term of this Addendum, Distributor will provide Wave Systems
with a purchase order for the calendar year’s requirements of Client Product,
although no quantity need be stated. Quantities will be determined in accordance
with the monthly POS Reports.

b.           Server Product will be provided by Wave Systems on CD-ROMs to
Distributor pursuant to purchase orders placed from time to time by Distributor.

5.    License Fees.   The license fee to Distributor for the Security Products
shall be 40 percent off of Wave Systems’ then current list price.

6.    Records, POS Reports, and Audits.

a.           Distributor shall maintain complete and accurate accounting
records, in accordance with sound accounting practices, to support and document
all license fees due Wave Systems hereunder. Such records shall contain at a
minimum the name and contact information for each End User or Dell entity
purchasing a license for a Security Product from Distributor, the type of
delivery (Internet or CD-ROM), the type of Security Product (Client Product or
Server Product) the date of license sale, the number of copies of the Security
Product licensed hereunder, and any refunds or returns. Such records shall be
retained for a period of at least three years after the fees to which such
records relate have been accrued and have been paid.

b.           Within five days after the end of each month, Distributor will
remit to Wave Systems the license fees due on copies of Client Product delivered
by Distributor to End Users and Dell entities during the immediately preceding
month, and provide Wave Systems with a POS Report, in a format reasonably
acceptable to Wave Systems, specifying the number of copies of Client Product
that Distributor delivered, the number of copies of the Client Product that were
returned by End Users or Dell entities, and the calculation of the amount due
Wave Systems pursuant to this Agreement. The POS Report shall also specify the
name and contact information for each End User or Dell entity purchasing a
license for a Security Product from Distributor. For each such customer the POS
Report shall show the type of delivery (Internet or CD-ROM), the type of
Security Product (Client Product or Server Product), and the date of license
sale, the number of copies of the Security Product licensed hereunder, and any
refunds or returns.

c.           Upon written request from Wave Systems at least ten days in
advance, Distributor shall provide reasonable access to Distributor’s records
referred to in Section 6a by an independent accounting firm chosen and
compensated by Wave Systems for the purpose of audit. Such audit shall take
place during Distributor’s normal business hours and shall not occur more
frequently than twice each calendar year. Such accounting firm shall be required
to sign an agreement protecting Distributor’s confidential information and shall
be authorized to report to Wave Systems only the

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amount of license fees due. In the event that such an audit discloses an
underpayment of more than five percent, then Distributor shall pay the costs of
such audit.

7.    Term and Termination.   This Addendum shall have the same term as the
Distributor Agreement and can be terminated separately under Section 13 of the
Distributor Agreement.

8.    Change to Arbitration Clause.   For all purposes, the first sentence in
Section 14f of the Distributor Agreement is changed to delete the word
“Maryland” and substitute “California.”

9.    Effect of Addendum.   To the extent this Addendum is inconsistent with the
Distributor Agreement, this Agreement shall prevail with respect to Security
Products and with respect to all products just for Section 8 hereof. This
effective date of this Addendum shall be the latter of the dates on which it is
signed below.

10. Change of Authorized Distribution Agreement (ADA) participants name. For all
purposes of use, and references, within the ADA, Envoy Data Inc. will be changed
to Envoy Data Corporation.

ENVOY DATA CORP.

 

WAVE SYSTEMS CORP.

 

 

 

 

 

Authorized Signature

 

Authorized Signature

 

 

 

 

 

Print Name and Title

 

Print Name and Title

 

 

 

 

 

Date

 

Date

 

 

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ATTACHMENT 1

SECURITY PRODUCTS

1.                 Client Product:

Wave Part Number 14-000033 Wave ETS Enterprise Security - Dell Edition 1.0

Dell SKU A0436206, Envoy Part Number ENV-14-000033, Synnex SKU 1037412

Wave’s ETS Enterprise Security includes TPM-based applications for file and
folder encryption, password and personal data management, multi-factor
authentication, key archive management, secure Windows logon, digital signature.
Furthermore, wizards are included to use Wave’s TCG-Enabled CSP for adding
hardware security to Outlook and Outlook Express email, Microsoft Encrypting
File System (EFS), and 802.1x authentication.

Price: $19.99

2.                 Server Product:

Wave Part Number 14-000016 Key Transfer Manager Enterprise Server AD 2.0

Dell SKU A0428504, Envoy Part Number ENV-14-000016, Synnex SKU 1032709-6

For server-based key management of trusted platforms, KTM Enterprise Server AD
provides the capability to securely store and/or migrate protected keys from one
TPM-enabled system to another according to security policies defined on the
server.  This product also protects the enterprise’s secure data by being able
to recover from security hardware malfunction. Integration with Microsoft Active
Directory benefits IT administrators by incorporating Active Directory policy
and authentication functions and by providing a consistent management interface.

Price $9,999.00

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ATTACHMENT 2

REPLICATION SERVICES AGREEMENT

This Agreement, dated                                   , is entered into by and
between the Envoy Data Inc. with its principal office located at 2090 E.
University Drive, Suite 112, Tempe, AZ 85281, and
                                     (“Replicator”), a  [check one] [ ]
corporation incorporated in                         [state]; [  ] partnership or
limited liability company; [  ] individual or sole proprietorship, with its
principal office located at                     
                                                                                                                                       .

1.   DEFINITIONS

a.      “Authorized Trademarks” means the trademarks, trade names, and logos to
be used on the CD-ROMs containing the Software and on the Packaging.

a.      “Packaging” means all CD-ROM sleeves and collateral materials, if any,
provided from time to time to Replicator by Envoy, including user manuals,
templates, overlays, quick reference guides, brochures, data sheets, and
registration cards.

c.      “Product” means the Software and Packaging together.

d.     “Replication Services” means the services to be performed by Replicator
pursuant to this Agreement.

e.      “Software” means the executable object code for Envoy’s software
provided to Replicator by Envoy from time to time pursuant to this Agreement.

2.                 REPLICATION SERVICES

Envoy hereby retains Replicator to perform the following Replication Services in
accordance with written orders placed with Replicator from time to time by
Envoy.

a.      arrange for the reproduction of text and graphics provided by Envoy onto
the non-recorded side of the CD-ROMs;

b.     replicate the Software onto the CD-ROMs;

c.      reproduce the Packaging;

d.     provide Envoy with samples of the CD-ROMs and Packaging for review and
approval;

e.      combine the Software and Packaging;

f.      deliver the Products to Envoy.

3.                 DELIVERABLES FROM ENVOY

To facilitate the performance of the Replication Services by Replicator, Envoy
shall provide Replicator with the following materials and shall periodically
update such materials as deemed necessary by Envoy:

a.      camera-ready text and graphics for reproduction onto the non-recorded
side of a CD-ROM;

b.     a master copy of the Software on a CD-ROM and updated master copies as
needed by Replicator to comply with orders received from Envoy; and

c.      copies of the Packaging for use by Replicator or a camera-ready version
of the Packaging for reproduction.

4.                 PAYMENT FOR SERVICES

Replicator’s fees for performing the Replication Services are specified in
Exhibit A. Added to those fees will be any applicable taxes, customs duties,
insurance charges, and freight charges incurred in shipping to the specified
destination. Replicator may change its fees upon thirty-days advance notice to
Envoy. Payment terms are also listed on Exhibit A.

5.                 RECORDS

a.      Replicator shall maintain records in the English language showing the
number of Products replicated. Such records shall be maintained for a period of
at least two years after the transaction to which they pertain was consummated.

b.     Such records shall be made available at Replicator’s place of business
for inspection and copying by Envoy, its customers or suppliers, and their
representatives during Replicator’s normal business hours upon at least ten-days
advance written notice.

6.                 ENVOY’S REPRESENTATIONS AND WARRANTIES

a.      Envoy represents that it has the right and authority to enter into this
Agreement and to grant Replicator the rights to replicate the Software and
Packaging granted in this Agreement.

b.     THE FOREGOING IS THE ONLY WARRANTY MADE BY ENVOY. ENVOY SPECIFICALLY
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.

7.                 REPLICATOR’S REPRESENTATIONS AND WARRANTIES

a.      Replicator represents that it has the right and authority to enter into
this Agreement.

b.     Replicator represents and warrants that it will accurately replicate the
Software and Packaging and that all CD-ROMs containing any portion of the
Software that are delivered by Replicator to Envoy will not contain any viruses,
worms, or other code that is specifically designed damage or interfere with any
end user’s software or date.

c.      Replicator agrees to replace and assume two-way transportation charges
for Products for which Replicator performs replication services that are
returned to Envoy due to defects in the media or replication process, provided
such Products are returned within one year from the time of shipment made by
Replicator.

d.     Replicator agrees to refrain from providing the Software or Packaging to
anyone but Envoy or a third party authorized by Envoy in writing to receive the
Software and/or Packaging. Replicator further agrees to refrain from attempting
to decrypt, disassemble, decompile, or otherwise derive the source code of the
Software.

e.      Replicator acknowledges that the Software and the Authorized Trademarks
are the property of Envoy or Envoy’s licensors. Replicator shall not use,
duplicate, or disseminate the Software or Authorized Trademarks except as
specifically provided in this Agreement.

8.                 AUTHORIZED TRADEMARKS

Replicator shall have the right to use the Authorized Trademarks on the CD-ROMs
and on the Packaging solely as permitted by Envoy. Replicator shall not use the
Authorized Trademarks in any other manner unless authorized by Envoy in writing.

9.                 SUBCONTRACTING

Replicator may subcontract to third parties such portions of the reproduction,
printing, and packaging of the Software and Packaging as Replicator may, in its
discretion, determine; provided, however, that Replicator remains primarily
liable for the performance of any such subcontractor and that any replication of
the Software may be subcontracted only to parties which have been previously
approved by Envoy and which agree in writing to be bound by the provisions of
Sections 7b, 7d, 7e, 10, 11b, 12, and 14c of this Agreement.

10.          CONFIDENTIALITY

Replicator acknowledges that, from time to time, it may be exposed to certain
confidential information of Envoy concerning the Software, such as proposed new
versions of the Software, the identity of Envoy’s suppliers and customers, and
Envoy’s unannounced marketing plans for Products (“Confidential Information”).
Replicator agrees that it will take appropriate steps to protect such
Confidential Information from unauthorized disclosure, that it will not disclose
such Information to any third party, and that it will not use any Confidential
Information other than as authorized by this Agreement without the prior written
consent of Envoy. Replicator’s obligations with respect to Confidential
Information shall continue until such information becomes publicly known other
than by breach of this Agreement by Replicator.

11.          INDEMNIFICATION

a.      Envoy will defend, indemnify, and hold Replicator harmless from and
against any and all liabilities, losses, damages, including reasonable
out-of-pocket costs and expenses associated with any claim or action brought
against Replicator for actual or alleged breach of Envoy’s warranties hereunder.

b.     Replicator shall indemnify and hold Envoy harmless from and against any
and all liabilities, losses, damages, costs, including reasonable out-of-pocket
costs and expenses associated with any claim or action brought against Envoy
that may arise from Replicator’s alleged breach of any of its representations or
warranties or alleged improper or unauthorized replication, packaging, or
delivery of the Software or Packaging.

c.      Indemnification under this Section 11 shall be contingent upon the party
seeking indemnification giving the indemnifying party prompt written
notification of a claim, as well as information, reasonable assistance, and
exclusive authority to evaluate, defend, and settle such claim.

12             LIMITATION OF LIABILITY

ENVOY’S LIABILITY TO REPLICATOR SHALL BE LIMITED TO DIRECT DAMAGES AND, EXCEPT
AS PROVIDED IN THE SECTION TITLED “INDEMNIFICATION,” SHALL NOT EXCEED THE AMOUNT
OF THE FEES PAID BY ENVOY TO REPLICATOR HEREUNDER. IN NO EVENT WILL ENVOY BE
LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS) SUFFERED BY REPLICATOR, EVEN IF ENVOY HAS PREVIOUSLY BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.

13.          TERM AND TERMINATION

a.      This Agreement will continue in effect for one year from the date
hereof. It will be automatically renewed for additional one-year terms on the
anniversary of that date.

b.     Either party may terminate this Agreement at any time, with or without
cause, upon thirty-days advance written notice to the other party.

c.      Upon termination of this Agreement for any reason, Replicator will
immediately cease duplication of the Software and Packaging and will return to
Envoy, at Replicator’s expense, the master versions of all Software and
Packaging, and all Confidential Information of Envoy. Envoy shall remit to
Replicator all fees due from Envoy within 30 days of such termination.
Termination by either party will not affect the rights of any end user who has
received the Software. Sections 6, 7, 10, 11, 12, 13c, and 14c shall survive
termination of this Agreement.

14.          GENERAL PROVISIONS

a.      Except as provided in Section 9, this Agreement and Replicator’s duties
hereunder may not be assigned by Replicator directly or by operation of law to
any other person, firm, or corporation without the express written approval of
Envoy. Upon written notice to Replicator, Envoy may assign this Agreement to a
parent, subsidiary, affiliate, or successor. This Agreement shall be binding
upon and inure to the benefit of permitted successors and assigns.

b.     All notices and demands hereunder shall be in writing and shall be served
by personal service or by mail at the address of the receiving party set forth
in this Agreement (or at such different address as may be designated by such
party by written notice to the other party). All notices or demands by mail
shall be by certified or registered mail, return receipt requested, or by
nationally-recognized private express courier, and shall be deemed complete upon
receipt.

c.      This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of                  , excluding that body of law
controlling conflicts of law. Any dispute arising out of or relating to this
Agreement, or breach thereof, shall be first submitted to the senior management
of each party for resolution. If the dispute cannot be resolved within 30 days
after such matter is referred to senior management, then the dispute shall be
submitted to binding arbitration in                   County,                  ,
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. All discovery must be concluded within 60 days after
the submission to arbitration. The decision of the arbitration panel shall be
final and may be entered as judgment in any court of competent jurisdiction. The
arbitration panel shall determine the allocation of arbitration costs and
reasonable attorneys’ fees between the parties according to the relative merits
of each party’s case. EACH PARTY HEREBY WAIVES THE RIGHT TO TRIAL BY JURY.

d.     Each party is acting as an independent contractor and not as an agent,
partner, or joint venturer with the other party for any purpose. Except as
provided in this Agreement, neither party shall have any right, power, or
authority to act or to create any obligation, express or implied, on behalf of
the other.

e.      Neither party shall be responsible for delays or failure of performance
resulting from acts beyond the reasonable control of such party. Such acts shall
include, but not be limited to, acts of God, strikes, walkouts, riots, acts of
war, epidemics, failure of suppliers to perform, governmental regulations, power
failures, earthquakes, or other disasters.

f.      The titles and headings of the various sections and paragraphs in this
Agreement are intended solely for reference and are not intended for any other
purpose whatsoever or to explain, modify, or place any construction on any of
the provisions of this Agreement.

g.      No provisions in either party’s purchase orders, or in any other
business forms employed by either party, will supersede the terms and conditions
of this Agreement, and no supplement, modification, or amendment of this
Agreement shall be binding, unless executed in writing by a duly authorized
representative of each party to this Agreement.

h.     The parties have read this Agreement and agree to be bound by its terms,
and further agree that this Agreement (including its Exhibit A which is hereby
incorporated into and made a part of this Agreement) constitutes the complete
and entire agreement of the parties and supersedes all previous communications,
oral or written, between them relating to the license and to the subject matter
hereof. No representations or statements of any kind made by either party that
are not expressly stated herein shall be binding on such party.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
specified above.

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ENVOY DATA INC.

REPLICATOR

“Envoy”

 

By:

 

 

By:

 

 

 

 

 

 

Print Name and Title

Print Name and Title

 

 

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EXHIBIT 10.27

EXHIBIT A

REPLICATOR’S FEES

 

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