Exhibit 10.2


 


October 29, 2008


 


Gerard T. Feeney


Chief Financial Officer


Wave Systems Corp.


480 Pleasant Street


Lee, MA 01238


 


Dear Mr. Feeney:


 


We are pleased to confirm the arrangements
under which Security Research Associates, Inc. (“SRA”) is engaged by Wave
Systems Corp. (the “Company”) as non-exclusive
placement agent on a “best-efforts” basis in connection with one or more
equity financing transactions to be completed by the Company (a “Financing”).  The term of this Agreement shall extend to November 4,
2008 (the “Term”).


 


During the term of our engagement, we will
provide you with assistance in connection with the Financing, which may include
performing valuation analyses and assisting you in negotiating the financial
aspects of the transaction.  During the
term of our engagement, we will also identify and contact potential investors
for the Company (the “SRA Investors”).


 


In the event the Financing is consummated,
the Company agrees to pay to SRA a transaction fee (the “Transaction Fee”)
consisting of (i) 6% (six percent) of the gross proceeds from the
Financing received by the Company at closing, and (ii) 36 month warrants
to acquire a number of shares of the Company’s Common Shares equal to 6% (six
percent) of the aggregate gross proceeds from the Financing received by the
Company divided by the effective price per share of the Company’s common shares
(on an as-if converted basis in the event of a convertible security) paid by
all of the investors in the Financing received by the Company at closing (the “SRA
Warrants”).  There will be no Transaction
Fees or Warrants issued to SRA on the exercise of Warrants by Investors.


 


The SRA Warrants issued to SRA pursuant to
this agreement will have a “cashless exercise” provision and will have an
exercise price of $0.40 per share and the underlying shares will be fully
registered and issued from the Company’s shelf. 
..


 


The SRA Warrants received by SRA from the
Company pursuant to this agreement shall be subject to a lock-up restriction
which complies with NASD Conduct Rule 2710(g)(1). The SRA warrants shall
not be sold by SRA during the offering, or sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale,
derivative, put, or call transaction that would result in the effective
economic disposition of the securities by any person for a period of 180 days
immediately 


 

















 


following the date of effectiveness or commencement
of sales of the public offering of the Company’s stock, except as provided in
NASD Conduct Rule 2710(g) (2).


 


Subject to applicable laws, rules and
regulations, the Company agrees to provide all information and documents
reasonably required to permit the SRA Investors to make an informed investment
decision with respect to an investment in the Company. Such information and
documents shall be provided at the cost of the Company.


 


The Company also agrees to
reimburse SRA periodically, upon request, or upon termination of our services
pursuant to this letter (the “Agreement”), for our reasonable and reasonably
documented out-of-pocket expenses, incurred in connection with our financial
advisory services and the Financing, including the reasonable fees and expenses
of legal counsel, travel expenses and printing. All such out-of-pocket fees and
expenses shall not exceed a combined aggregate amount of $10,000.


 


Please note that any written
or oral opinion or advice provided by SRA in connection with our engagement is
exclusively for the information of the Board of Directors and senior management
of the Company, and may not be disclosed to any third party (other than the
Company’s legal, accounting or other advisors, who shall have been instructed
with respect to the confidentiality of such advice) or circulated or referred
to publicly without our prior written consent, except as to the extent required
by law, judicial or administrative process or regulatory demand.


 


The Company or SRA shall be
entitled to terminate this Agreement before the end of the agreement Term on
written notice to the other party at the address set forth for such party on
the signature page hereof.  In the
event of the termination of this Agreement, SRA shall be entitled to be paid
its existing reasonable out-of-pocket expenses subject to the terms described
above.  The confidentiality provisions of
this Agreement shall be unaffected by the termination of this agreement.  The Company shall not be obligated to
reimburse any expenses incurred by SRA or its advisors with respect to
activities undertaken after notification of termination is given.


 


SRA is an independent
contractor and placement agent of the Company. SRA will not have any right or
authority to bind the Company or otherwise create any obligations of any kind
on behalf of the Company and will make no representation to any third party to
the contrary.


 


During the term of this
Agreement and thereafter, each of the Company and SRA agrees to keep
confidential and not disclose to any third party any confidential information
of the other party, and to use such confidential information only in connection
with the engagement hereunder; provided, however, the foregoing will not
prohibit disclosures (i) to the parties’ employees, agents and other
representatives to the extent necessary to enable the Company or SRA to perform
its responsibilities under this Agreement, (ii) to the extent required by
law, judicial or administrative process or regulatory demand, or (iii) with
respect to matters which become public other than by the actions of the
disclosing party hereunder. This section will survive the termination of this
Agreement for a period of five years.


 

















 


Each of the Company and SRA
agrees that in connection with any Financing intended to qualify for the
exemption from the registration requirements of the Securities Act of 1933, as
amended (the “Act”), provided by Section 4(2) of the Act, the Company
and SRA shall limit offers to sell, and solicitations of offers to buy,
securities of the Company in connection with the Financing to persons
reasonably believed by it to be “qualified institutional buyers” as such term
is defined in Rule 144A under the Act or “accredited investors” as such
term is defined in Rule 501(a) of Regulation D promulgated under the
Act.


 


Each of the Company and SRA
agrees that any offers it makes in connection with the Financing will be made
only to prospective purchasers on an individual basis and that it will not
engage in any form of general solicitation or general advertising (within the
meaning of Rule 502 under the Act) in connection with the Financing.  Each of the Company and SRA agrees to conduct
the Financing in a manner intended to comply with the registration or
qualification requirements, or available exemptions there from, under
applicable state “blue sky” laws and applicable securities laws of other
jurisdictions.


 


The Company may decline to
consummate the Financing with any prospective purchaser in the Company’s sole
discretion.


 


The
Company agrees to:


 


(a)                                  Indemnify and hold SRA
harmless against any and all losses, claims, damages or liabilities to which
SRA may become subject arising out of or in connection with any of the services
rendered by SRA pursuant to this Agreement, unless such losses, claims, damages
or liabilities resulting from the gross negligence or willful misconduct of SRA
or a breach of this agreement by SRA; and


 


(b)                                 Reimburse SRA periodically
for reasonable legal or other expenses incurred by SRA in connection with
investigating, preparing to defend or defending, or providing evidence in or
preparing to serve or serving as a witness with respect to, any lawsuits,
investigations, claims or other proceedings arising in any manner out of or in
connection with the rendering of services by SRA pursuant to this Agreement
(including, without limitation, in connection with the enforcement of this Agreement
and the indemnification obligations set forth herein); it being understood
however that the Company shall have no obligation to reimburse SRA for any such
expenses and SRA shall immediately repay any such reimbursements by the Company
in the event any losses, claims, damages or liabilities are finally judicially
determined to have resulted from the gross negligence or willful misconduct of
SRA or a breach of this agreement by SRA.


 


The Company agrees that the
indemnification and reimbursement commitments set forth in this document shall
apply whether or not SRA is a formal party to any 


 

















 


lawsuits, arbitrations,
claims or other proceedings and that such commitments shall extend upon the
terms set forth in this paragraph to any controlling person, affiliate,
director, officer, employee or agent of SRA (each, with SRA, an “Indemnified
Person”).  In the event an Indemnified
Person is made a formal party to a lawsuit, claim or other proceeding arising
out of or in connection with any of the services rendered by SRA pursuant to
this Agreement, and the Company takes over the defense of such action for an
Indemnified Person, the Company further agrees that it will not, without such
Indemnified Person’s prior written consent, which consent shall not be unreasonably
withheld, enter into any settlement of a lawsuit, claim or other proceeding
arising out of or in connection with the transaction unless such settlement
includes an express and unconditional release from the party bringing the
lawsuit, claim or other proceeding of all Indemnified Persons.  With respect to the immediately preceding
sentence, in the event an Indemnified Person reasonably withholds their consent
to a settlement, the Indemnified Person shall be responsible for all subsequent
costs and expenses arising out of the defense of the Indemnified Person.


 


The Company further agrees
that the Indemnified Persons are entitled to retain separate counsel of their
selection in connection with any of the matters in respect of which
indemnification, reimbursement or contribution may be sought under this
Agreement, provided that, in connection with any one action or proceeding, the
Company shall not be responsible for the fees and expenses of more than one
separate law firm or individual attorney in any one jurisdiction for all
Indemnified Persons.


 


Any dispute arising out of
this Agreement shall be resolved in an arbitration conducted pursuant to the rules of
the National Association of Securities Dealers, Inc. in New York, NY.


 


Please confirm that the
foregoing is in accordance with your understanding by signing and returning to
us the enclosed copy of this Agreement, which shall become a binding agreement
upon our receipt. We are delighted to accept this engagement and look forward
to working with you on this assignment.


 


Very truly yours,


Brian G. Swift, Chairman and CEO


 


Agreement Confirmed by:


 


	
  Security Research
  Associates, Inc.

  	
   

  	
  Wave Systems Corp.

  
	
  80 E. Sir Francis Drake Boulevard, Suite 3F

  	
   

  	
  480 Pleasant Street

  
	
  Larkspur, CA 94939

  	
   

  	
  Lee, MA 01238

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David N. Olson

  	
   

  	
  By:

  	
  /s/ Gerard T. Feeney

  
	
   

  	
  David N. Olson

  	
   

  	
  Mr. Gerard T. Feeney

  
	
   

  	
  Managing Director

  	
   

  	
  Chief Financial Officer

  
	
  Date: 10/29/08

  	
   

  	
  Date: 10/29/08