Exhibit 10.2


 


December 24,
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 December 30,
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 $0.28 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: December 24, 2008

  	
  Date: December 24, 2008

  
					



 

















 


Engagement Letter Expense Annex


 


CONFIDENTIAL


 


Security Research Associates, Inc. (“SRA”) and Wave Systems Corp.
(the “Company”) are parties to an engagement letter dated December 24,
2008.  In connection with the engagement
letter, SRA and the Company hereby agree as follows:


 


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.


 


It is agreed that SRA will not charge Wave System Corp. expenses
associated with the December 24, 2008 financing.


 


	
   

  	
   

  	
  Security Research Associates, Inc.

  	
   

  	
   

  	
  Wave Systems Corp.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  

  	
   

  	
  By:

  	
  /s/ Gerard T. Feeney

  
	
   

  	
   

  	
  David N. Olson

  	
   

  	
   

  	
  Gerard T. Feeney

  
	
   

  	
   

  	
  Managing Director

  	
   

  	
   

  	
  CFO