EXHIBIT 10.1


SUBSCRIPTION AGREEMENT


August 4, 2006


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 up to                   
shares of Class A Common Stock (the “Total Shares”), par value $0.01 per
share (the “Common Stock”), subject to adjustment by the Company’s Board
of Directors, for a purchase price of $2.05 per share (the “Purchase
Price”).


3.             The
offering and sale of the Total Shares (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. 333-130409)
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 Total Shares 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 that portion of the Total
Shares set forth below (the “Shares”) for the aggregate purchase price
set forth below.  The Shares shall be
purchased pursuant to the Terms and Conditions for Purchase of Shares attached
hereto as Annex I and incorporated herein by this reference as if fully
set forth herein.


5.               The transaction will to settle via DVP (as
defined below) UNLESS you have a
cash account with Security Research Associates, Inc. (“SRA”) with
sufficient cash to fund the Purchase Price and you elect to settle through such
account by initialing on the following line:


            
(Initial Here For  Settlement through
account with SRA).


“DVP” means delivery
versus payment  through DTC (i.e., the
Company shall deliver Shares registered in the Investor’s name and address as
set forth below and released by American Stock Transfer










 



 


Corporation, the Company’s
transfer agent (the “Transfer Agent”) to the Investor at the Closing
directly to the account(s) at Security Research Associates, Inc. through DTC
and simultaneously therewith payment shall be made from such account(s) by
Security Research Associates, Inc. to the Company).


If you do not have an
existing account at Security Research Associates for settlement by DVP, we will
need the following information to be faxed to us along with your signature page
to this agreement. Please fax your clearing information to Security Research
Associates at 415-925-0264 to establish an account with our clearing broker
Wedbush Morgan Securities. Below is what we will need to open your
account.  A “New Account form” is
attached in Annex B for your convenience:


·                  The exact registration name of the account


·                  Tax ID or Social Security number of
registered holder


·                  Investor’s Clearing firm Prime Broker &
contact information (contact name, phone number, email address)


·                  Internal Account number at Prime Broker


·                  Institutional & Agent ID


6.             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 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.”)


7.             The
Investor represents that, prior to or in connection with the receipt of this
Agreement, it has received the final U.S. Base Prospectus, dated January 13,
2006, which is a part of the Company’s Registration Statement, and has received
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 Shares:


Purchase Price Per Share:
$2.05


Aggregate Purchase Price:
$


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: August 4, 2006

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone #:

  	
   

  
	
   

  	
  Email:

  	
   

  
								



 


Agreed and
Accepted


August 4, 2006:


WAVE SYSTEMS CORP.


 


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 


[Signature — Subscription Agreement]


 









 



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 Shares 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:

  	
   

  	
   

  



 















 


EXHIBIT
B


Institutional
DVP/RVP New Account Form.


If settling via DVP, and
the Investor does not have an existing account with Security Research
Associates, Inc., please fill out the below New Account Form and fax back to
SRA with your signature page to the Subscription Agreement.


Please Fax to SRA at: 
415-925-0264


Send “Attention Devon Wygaerts”


(Devon can be reached at
415-925-0346 or Devon@sracap.com)


	
  ACCOUNT #

  	
   

  	
  REP #

  	
   

  	
  TAX ID#

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


DVP
INSTRUCTIONS:


	
  DTC #

  	
   

  	
  INSTITUTION #

  	
   

  	
  AGENT BANK #

  	
   

  	
  INTERNAL A/C #

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


SHORT NAME: 


ORIGINAL CONFIRMATION:  


 


DUPLICATE
INSTRUCTIONS: 


INSTITUTION
OR I/P #  




TRIPLICATE
INSTRUCTIONS:  




SENT BY:                                                                 
DATE:                                                       


CONTACT
INFORMATION:


Name (Printed):                                                   


Telephone #:                                                    Email Address:                                                       



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ANNEX I


 


TERMS AND CONDITIONS FOR
PURCHASE OF SHARES


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 Shares. 
Subject to the terms and conditions of this Agreement, the Company has
authorized the sale of the Shares.


2.             Agreement
to Sell and Purchase the Shares; Placement Agents.


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 Shares
set forth on the last page of this Agreement to which these Terms and
Conditions for Purchase of Shares 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 Total Shares to them as part of the Offering.  The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the “Investors”.  The Company may complete sales of the
remaining Total Shares 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 Shares 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 Shares and Funds.


3.1.         Closing.  The completion of the purchase and sale of
the Shares (the “Closing”) will occur on or before August 9, 2006 (the “Closing
Date”).  At the Closing and in
accordance with paragraph 5 of the Subscription Agreement: (a) the Company will
cause the Transfer Agent to deliver to the Investor the number of Shares 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
(b) the aggregate purchase price for the Shares being purchased by the Investor
will be paid by or on behalf of the Investor to the Company in the manner set
forth in Section 3.3 below.


3.2.         (a)           Conditions to the
Company’s Obligations.  The Company’s obligation to issue
the Shares to the Investor will be subject to the receipt by the Company of the
aggregate purchase price for the Shares being purchased hereunder as set forth
on the Signature 



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Page, (b) the
accuracy of the representations and warranties made by the Investor in this
Agreement, (c) the fulfillment of those undertakings of the Investor to be
fulfilled prior to the Closing Date, (d) the Registration Statement remaining
in effect and no stop order proceedings with respect thereto being pending or
threatened, and (e) 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 Shares will be subject to the accuracy in all material respects on
the Closing Date of the representations and warranties made by the Company in
Section 4.1 below and the fulfillment of those undertakings of the Company with
respect to the Shares and/or the Investor to be fulfilled prior to the Closing
Date (collectively, the “Company Closing Conditions”).  The Investor’s obligations are expressly not
conditioned on the purchase by any or all of the Other Investors of the
remaining Total Shares that they have agreed to purchase from the Company.


3.3.         Delivery
of Funds; Delivery of Shares.


Subject to all of the provisions set forth in Section
5 of the Subscription Agreement:  Unless
the Investor elects to settle the Shares purchased by such Investor by means of
the cash account option set forth in Section 5 of the Subscription Agreement, no later than three (3) business days after the
execution of this Agreement by the Investor and the Company, (i)
the Investor shall confirm that the account or accounts at SRA to be credited
with the Shares being purchased by the Investor have a minimum balance equal to
the aggregate purchase price for the Shares being purchased by the Investor
(ii) authorize and instruct SRA to execute a trade for the Shares, (an
electronic confirmation will be generated to the clearing firm which will then
affirm the trade) and  (iii) the Company
shall deliver the Shares to the Investor directly to the account(s) at SRA
identified by Investor and 
simultaneously therewith payment shall be made from such account(s) by
SRA to the Company.


If the Investor elects to settle the Shares purchased
by such Investor by means of the cash account option set forth in Section 5 of
the Subscription Agreement no later than
three (3) business days after the execution of this Agreement by the Investor
and the Company,the Company shall deliver the Shares to the
Investor directly to the account(s) at SRA identified by Investor and
simultaneously therewith payment shall be made from such account(s) by SRA to
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: (a) 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 Shares,
including investments in securities 



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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 Shares; (b) 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 (c) the Investor, in connection with its
decision to purchase the number of Shares 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 Shares, or possession or
distribution of offering materials in connection with the issue of the Shares
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 Shares or
has in its possession or distributes any offering material, in all cases at its
own expense.  The Placement Agents are
not authorized to make and have not made any representation or use of any
information in connection with the issue, placement, purchase and sale of the
Shares, 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: (a) 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 (b) 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) and except as
the indemnification agreements of the Investor herein may be legally
unenforceable.


(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 Shares 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 Shares.


(e)           The Investor
represents, warrants and agrees that, since the earlier to occur of (i) the
date on which the 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 (a) engaged in any short
selling, (b) established or increased any “put equivalent position” as
defined in Rule 16(a)-1(h) under the Securities Exchange Act of 1934 or (c)
granted any option for the purchase of or entered into any hedging or similar 



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


(a)           if to the Company, to:


 


Wave Systems Corp.


480 Pleasant Street


Lee, MA 01238


Fax: (413) 243-0391


ATTN: Gerard Feeney, CFO


 


with copies to:


 


Bingham McCutchen LLP


399 Park Avenue


New York, NY 10022


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.



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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.


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 Shares to such
Investor.


13.          Entire
Agreement.  This Agreement 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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