EXHIBIT 10.18
                              EMPLOYMENT AGREEMENT

         AGREEMENT made this eighth day of June, 1998, effective as of June 8,
1998 (this "Agreement"), by and between WAVE SYSTEMS CORP., a Delaware
corporation, with a principal place of business at 480 Pleasant St., Lee, MA.
(hereinafter referred to as "Employer"), and Gerard T. Feeney, an individual
residing at 9 Heritage Lane, Andover, MA (hereinafter referred to as
"Executive").
         WHEREAS, Employer wishes to retain Executive's skill, knowledge and
experience for the management of its operations and Executive wishes to make
such skills, knowledge and experience available to Employer;

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Employer and Executive hereby agree
as follows:

         Section 1.  Employment.

         1.1 Term. Employer shall employ Executive, and Executive shall serve
Employer as Senior Vice President, Finance and Administration and Chief
Financial Officer, for a term beginning on June 8, 1998 and ending on June 7,
1999, as such date may be extended to the terms of this paragraph (the "Term of
Employment"), unless earlier terminated pursuant to the provisions of Section 5
of this Agreement. The Term of Employment shall be automatically extended for
consecutive additional periods of one (1) year each unless either Employer or
Executive provides written notice to the other of its/his intention not to renew
not less than sixty (60) days prior to the expiration of the then current term.

         1.2      Duties.

                  (a) Capacity. During the Term of Employment, Executive shall
         assume and perform such executive, operational and financial duties and
         responsibilities commensurate with his position, and Executive shall
         further assume and perform such other reasonable executive and
         managerial responsibilities and duties as may be assigned to him
         hereafter from time to time by the Board of Directors of Employer.
         Executive shall comply with all applicable employment policies of
         Employer.

                  (b) Schedule. During the Term of Employment, Executive shall
         be employed on a full-time basis. Executive's working schedule during
         the Term of Employment shall correspond with the reasonable
         requirements of his position.

         1.3 Compensation and Benefits. During the Term of Employment, as
compensation for the services to be rendered during such period and the other
obligations undertaken by Executive hereunder, Executive shall be entitled to
the following compensation:

                  (a) Salary. Employer shall pay to Executive an annual minimum
         Base Salary of One Hundred and Eighty Five Thousand ($160,000.00)
         Dollars, payable in accordance with Employer's normal payroll
         procedures. Said annual minimum Base Salary may be increased from time
         to time by Employer in the sole and absolute discretion of the Board of
         Directors of Employer, but shall in no event be reduced by Employer
         without the prior consent of Executive.

                  (b) Bonuses. Executive shall be entitled to operational
         bonuses based upon performance. The bonus structure for the initial
         Term of Employment is set forth on Schedule A attached hereto and
         incorporated herein. The bonus structure for all future periods shall
         be subject to determination of Employer, based on similar methods and
         methodologies to those set forth on Schedule A.
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                  (c) Expenses. During the Term of Employment, Employer shall
         pay or reimburse Executive for all reasonable and necessary business
         expenses incurred or paid by him in the performance of his duties and
         responsibilities hereunder, subject to such reasonable substantiation
         or documentation as may be required by the Board of Directors from time
         to time.

                  (d) Benefits. During the Term of Employment, Executive shall
         be entitled to four (4) weeks vacation and other such fringe benefits,
         including paid holidays, health, life and disability insurances, sick
         days, personal days, etc. in accordance with such executive benefit
         plans and policies as have been or may be established by Employer from
         time to time or which Employer is required to maintain by law.

                  (e)  Additional  Benefits. In addition to all other benefits 
         provided hereunder,  Employer shall pay to Executive the benefits set 
         forth on Schedule B.

         Section 2.  Development of Inventions, Improvements or Know-How.

         2.1 Information. During the Term of Employment, Executive shall keep
Employer informed of any and all promotional and advertising materials,
catalogs, brochures, plans, customer lists, supplier lists, candidate lists,
manuals, handbooks, inventions, discoveries, improvements, trade secrets, secret
processes and any technology, know-how or intellectual property made or
developed by him, in whole or in part, or conceived of by him, alone or with
others, which results from any work he may do for, or at the request of
Employer, or which relates in any way to the business operations, activities,
research, investigations or obligations of Employer (collectively, the
"Confidential Information").

         2.2 Assignment of Rights. Executive, and his heirs, assigns and
representatives shall assign, transfer and set over, and do hereby assign,
transfer and set over, to Employer, and its successors and assigns, all of his
and their right, title and interest in and to any and all Information, and any
patents, patent applications, copyrights, trademarks, tradenames or other
intellectual property rights relating thereto, provided or conceived by
Executive during the Term of Employment.

         Section 3. Non-Disclosure. The Executive shall keep secret and retain
in strictest confidence, and shall not use for the Executive's benefit or the
benefit of others, except in connection with the business and affairs of the
Employer (the "Business"), all Confidential Information and shall not disclose
any Confidential Information to anyone outside of the Employer, except for
Confidential Information which is at the time of receipt by the Executive, or
thereafter becomes, publicly known through no wrongful act of the Executive. The
obligations of Executive under this Section 3 shall survive any termination of
this Agreement for a period of five (5) years.

         Section 4. Covenant Not To Compete. In consideration of the Employer's
obligations hereunder, during the Term of Employment and during the Designated
Period (as defined herein), the Executive will not (i) anywhere within North
America, engage, directly or indirectly, alone or as a shareholder (other than
as a holder of less than five percent (5%) of the common stock of any publicly
traded corporation), partner, officer, director, executive or consultant in any
other business identified as a direct competitor in the Company's annual Form
10-K; (ii) divert to any competitor of the Employer any customer of the
Employer; or (iii) solicit or encourage any officer, executive, employee or
consultant of the Employer to leave its employ for employment by or with any
competitor of the Employer. If at any time the provisions of this Section 4
shall be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 4 shall be
considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter, and
the Executive agrees that this Section 4 as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein. The term "Designated Period" shall mean a period of two (2) years
immediately following any termination of this Agreement and/or Executive's
employment hereunder, whether voluntary or involuntary and regardless of the
reason for termination.

         Section 5.  Termination of Agreement.
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         5.1.     Right to Terminate.

                  (a) Death. This Agreement shall terminate immediately upon
         Executive's death.

                  (b) Disability. In the event that Executive, because of
         accident, disability or physical or mental illness, is incapable of
         performing his duties hereunder, unless otherwise prohibited by
         applicable law, Employer shall have the right to terminate Executive's
         employment hereunder upon thirty (30) days prior written notice to
         Executive. For purposes of this Section 5.1(b), Executive shall be
         deemed to have become incapable of performing his duties hereunder if
         he shall have been incapable of so doing for (i) a continuous period of
         one hundred eighty (180) days and remains so incapable at the end of
         such one hundred eighty (180) day period; or (ii) periods amounting in
         the aggregate to one hundred eighty (180) days within any one period of
         three hundred sixty-five (365) days and remains so incapable at the end
         of such aggregate period of one hundred eighty (180) days.

                  (c) Cause. Employer shall have the right to terminate
         Executive's employment hereunder for cause immediately without prior
         notice to Executive. The term "cause" shall mean (i) misappropriation
         of material business opportunity, (ii) fraud, embezzlement, or
         misappropriation of funds involving assets of Employer or any of their
         customers, (iii) commission of or conviction with respect to any
         criminal activity which materially affects Executive's ability to
         perform his duties or materially harms the reputation of Employer or
         (iv) final written determination by the Board of Directors of Employer
         after thirty (30) days notice to Executive and the opportunity for
         Executive to be heard by the Board of Directors of (A) Executive's
         willful failure or refusal to comply with material and reasonable Board
         of Directors directives or to render the services required under this
         Agreement (except in the case of an accident, disability or physical or
         mental illness) or (B) Executive's material breach of this Agreement.

                  (d) Deemed Termination. Executive shall have the right to
         terminate this Agreement and resign from his employment with Employer
         by written notice to Executive within thirty (30) days of the effective
         date of any material adverse change by Employer in Executive's
         compensation, responsibility, location of employment, or other material
         terms of employment except as specifically contemplated herein or
         within thirty (30) days of the occurrence of a material breach by
         Employer of the terms and conditions of this Agreement.

                  (e) Other. Employer and Executive shall each have the right to
         terminate this Agreement and Executive's employment hereunder for any
         other reason not specified in this Section 5.1, with or without cause,
         upon thirty (30) days prior written notice to the other party.

                  (f)      Rights and Obligations of Executive Upon Termination.

                           (i) Upon the termination of Executive's employment
                  pursuant to Sections 5.1(a), (b), (c), (d), or (e), of this
                  Agreement, Employer shall not have any further obligation to
                  Executive under this Agreement except (other than as provided
                  in Section 5.1(f)(ii) below) to distribute to Executive his
                  Base Salary due pursuant to Section 1.3(a) hereof (and accrued
                  vacation pay) up to the date of termination.

(ii) In the event of a Deemed Termination as provided for in Section 5.1(d)
     above or in the event that Executive shall terminate this Agreement and
     Executive's employment hereunder without cause pursuant to Section 5.1(e)
     above, Employer agrees (i) to pay to Executive as severance, on the date of
     such termination, a lump sum payment in an amount equal to one (1) year of
     the Executive's annual Base Salary then in effect, (ii) and guaranteed
     portion of bonus, benefits and similar relocation package. However, should
     you secure employment elsewhere during said period, your severance (other
     than relocation costs) will stop once work has begun with your new
     employer. Similar relocation costs will be reimbursed unless you are able
     to negotiate reimbursement from your new employer. Regardless of securing
     employment elsewhere, options will continue to vest for at least one year
     from the termination date and for the portion of time greater than one year
     and up to your next anniversary vesting period is reached. Vested Options
     are to be exercised within 90 

<PAGE>

     days  after final vesting date, and (iii) continue the Executive's health 
     insurance and other benefits set forth or on Schedule B for a period 
     equal to the remaining Term of Employment then in effect.

                    (iii) Upon the termination of this Agreement and Executive's
               employment hereunder, whether voluntary or involuntary, and
               regardless of the reason for or manner of termination, all of the
               obligations of Executive under Sections 2.2,3, and 4 shall remain
               in full force and effect and shall survive the termination of
               this Agreement to the extent set forth herein.

     Section 6. Miscellaneous.

     6.1 Remedies.

          (a) Injunctions. Inasmuch as any breach of, or failure to comply with,
     this Agreement will cause serious and substantial damage to Employer, if
     Executive should in any way breach or fail to comply with the terms of this
     Agreement, Employer shall be entitled to an injunction restraining
     Executive from such breach or failure.

          (b) Cumulative Remedies. All remedies of Employer expressly provided
     for herein are cumulative of any and all other remedies now existing at law
     or in equity. Employer shall, in addition to the remedies herein provided,
     be entitled to avail itself of all such other remedies as may now or
     hereafter exist at law or in equity for compensation, and for the specific
     enforcement of the covenants contained herein. Resort to any remedy
     provided for hereunder or provided by law shall not prevent the concurrent
     or subsequent employment of any other appropriate remedy or remedies, or
     preclude the recovery by Employer of monetary damages.

     6.2 Amendment. This Agreement may be amended only by a writing duly
executed by the parties hereto.

     6.3 Entire Agreement. This Agreement and any other agreements expressly
referred to herein set forth the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, whether oral or written, between the parties regarding the subject
matter hereof.

     6.4 Notice. For purposes of this Agreement, notices and communications
provided or permitted to be given hereunder shall be deemed to have been given
when (i) made by telex, telecopy or facsimile transmission; or (ii) sent by
overnight courier or mailed by United States registered or certified mail,
return receipt requested, postage prepaid to the parties at their addresses set
forth below their signature to this Agreement, or at such other addresses as
either may designate in writing as aforesaid from time to time.

     6.5 Assignment. This Agreement is personal as to Executive and shall not be
assignable by Executive. Employer may assign its rights under this Agreement to
any affiliate or to any other person, firm, corporation, or other entity which
may acquire all or substantially all of the business which is now or hereafter
conducted by Employer, provided, that any such assignment shall be subject to
the express terms and conditions hereof.

     6.6 Governing Law. This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York.

     6.7 Severability. Each section and subsection of this Agreement constitutes
a separate and distinct provision hereof. It is the intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applicable in each jurisdiction
in which enforcement is sought. Accordingly, if any provision of this Agreement
shall be adjudicated to be invalid, ineffective or unenforceable, the remaining
provisions shall not be affected thereby. The invalid, ineffective or
unenforceable provisions shall, without further action by the parties, be
automatically amended to affect the original purpose and intent of the invalid,
ineffective and 

<PAGE>

unenforceable provision; provided, however, that such amendment shall apply only
with respect to the operation of such provision in the particular jurisdiction
with respect to which such adjudication is made.

         6.8 Waiver. The failure of Employer to insist upon strict adherence to
any term of this Agreement on any occasion shall not be construed as a waiver of
or deprive Employer of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver by Employer must be in
writing and signed by a duly authorized representative of Employer other than
Executive.

         6.9 Headings. The headings of this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of this Agreement.

         6.10 Binding Effect. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the respective parties hereto and their
heirs, personal representatives, successors and permitted assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.

                                       EMPLOYER:
                                       WAVE SYSTEMS CORP.


                                       By:  /s/ Steven Sprague
                                       Steven K. Sprague, President & COO


                                       Address for Notices:

                                       Wave Systems Corp.
                                       480 Pleasant St.
                                       Lee, MA  01238


                                       EXECUTIVE / Employee

                                       By:      /s/ Gerard T. Feeney
                                                Name: Gerard T. Feeney
                                                Title: Senior VP, CFO

                                       Address for Notices:

                                       Gerard T. Feeney
                                       Nine Heritage Lane
                                       Andover, MA 01810