Document:

Exhibit
10.1

 

WAVE
SYSTEMS CORP.
480 Pleasant Street

Lee, Massachusetts 01238

 

LETTER
AGREEMENT

 

September 4, 2003

 

To the undersigned holder of the Preferred
Shares

issued pursuant to the Purchase Agreement

(as defined below) and the undersigned holder of

a Warrant (as defined in the Purchase Agreement)

 

Gentlemen:

 

We refer to the Series H Convertible Preferred Stock Purchase
Agreement, dated as of April 30, 2003, as amended (as amended, the
“Purchase Agreement”), among Wave Systems Corp. (the “Company”) and the
purchasers listed on Exhibit A thereto. 
Unless otherwise defined herein, the terms defined in the Purchase
Agreement shall be used herein as therein defined.

 

Upon the effectiveness of this letter agreement as set forth below, the
Company and the undersigned purchaser agree as follows:

 

(a)          The undersigned purchaser hereby irrevocably waives
all rights to receive dividends accrued and accruing under Section 2 of
the Certificate of Designation in respect of the Preferred Shares held by the
undersigned purchaser.

 

(b)         On or prior to September 12, 2003, the
undersigned purchaser shall convert all of his, her or its Preferred Shares
pursuant to Section 5 of the Certificate of Designation.

 

(c)          The total number of Warrant Shares issuable upon
exercise of the Warrant held by the undersigned purchaser shall be reduced by
such purchaser’s pro  rata  share of 900,000 Warrant
Shares.  The term “pro  rata
share” as used herein shall mean, for the undersigned purchaser, the
percentage obtained by dividing (x) the total number of Preferred Shares
purchased by such purchaser at the Closing by (y) the total number of Preferred
Shares and the Other Preferred Shares purchased by all purchasers who execute
and return a letter agreement substantially identical in form to this letter
agreement.

 

(d)         On or prior to September 12, 2003, the
undersigned purchaser will exercise its Warrant in full pursuant to
Section 2 thereof and pay the consideration

 

 

therefor
by wire transfer of immediately available funds in accordance with the wire
instructions set forth below.

 

(e)          The definition of “Warrant Price” in Section 9 of
the undersigned purchaser’s Warrant shall be amended to read in its entirety as
follows:

 

“‘Warrant Price’ means $1.00.”

 

Except as expressly provided herein, no term or provision of the
Transaction Documents shall be amended or otherwise modified, and each term or
provision of the Transaction Documents shall remain in full force and effect.

 

If you agree to the terms and provisions hereof, please evidence such agreement
by executing and returning this letter agreement and the attached waiver via
facsimile to Wave Systems Corp., at (413) 243-0391, Attention to Gerard T.
Feeney.

 

This letter amendment shall become effective as of the date first above
written if, and only if, on or before Friday, September 12, 2003, the
Company shall have received (i) counterparts of this letter agreement in
substantially identical form executed by the Company, the undersigned purchaser
and (a) the holders of at least three-fourths (3/4) of
the aggregate number of Preferred Shares and Other Preferred Shares outstanding
(less the aggregate number of Preferred Shares held by the undersigned
purchaser) (the “Other  Required  Preferred  Holders”)
and (b) the holders of Warrants and the Other Warrant exercisable for at least
three-fourths (3/4) of the aggregate number of shares of
Warrant Stock (as defined in the Warrants) issuable under the Warrants and the
Other Warrant (less the aggregate number of shares of Warrant Stock issuable
upon exercise of the Warrant held by the undersigned purchaser) (the “Other
Required  Warrant  Holders”); (ii) counterparts of the
attached waiver executed by the Company, the undersigned purchaser and the same
Other Required Preferred Holders and the Other Required Warrant Holders who
executed counterparts of this letter agreement in substantially identical form;
(iii) the attached Conversion Notice executed by the undersigned
purchaser; (iv) the attached Exercise Form executed by the undersigned
purchaser; (v) original stock certificate representing the Preferred Shares
held by the undersigned purchaser (the “Stock Certificate”); (vi) the original
Warrant held by the undersigned purchaser (the “Warrant Certificate”); and
(vii)  payment in full of the exercise price for all of the shares of
Warrant Stock issuable upon exercise of the undersigned purchaser’s Warrant (as
adjusted hereby).

 

The Conversion Notice, the Exercise Form, the Stock Certificate and the
Warrant Certificate should be delivered via overnight courier to the Company,
c/o Bingham McCutchen LLP, at 399 Park Avenue, New York New York
10022, Attention to Matthew McMurdo. 
The Company shall inform the undersigned purchaser on Wednesday,
September 10, 2003 of the adjusted amount of shares of Warrant Stock issuable
upon exercise of the undersigned purchaser’s Warrant and the cost thereof.

 

2

 

Payment for the Warrant Stock
shall be made by Friday, September 12, 2003 via wire transfer to the
following:

 

Wave Systems Corp.

Bank ABA/Routing #:  021001088

Account #:  610185055

 

HSBC Bank

452 Fifth Avenue

New York, NY  10018

 

[Remainder of page intentionally left blank]

 

3

 

This letter agreement may be executed in any number of counterparts and
by any combination of the parties hereto in separate counterparts (including by
facsimile), each of which counterparts shall be an original and all of which
taken together shall constitute one and the same letter amendment.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  WAVE SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Agreed as of the date

  first above written:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

4Exhibit
10.2

 

WAVE
SYSTEMS CORP.
480 Pleasant Street

Lee, Massachusetts 01238

 

WAIVER

 

September 4, 2003

 

To the undersigned holder of the Preferred
Shares

issued pursuant to the Purchase Agreement

(as defined below) and the undersigned holder of

a Warrant (as defined in the Purchase Agreement)

 

Gentlemen:

 

We refer to the Series H Convertible Preferred Stock Purchase
Agreement, dated as of April 30, 2003, as amended (as amended, the
“Purchase Agreement”), among Wave Systems Corp. (the “Company”) and the purchasers
listed on Exhibit A thereto.  Unless
otherwise defined herein, the terms defined in the Purchase Agreement shall be
used herein as therein defined.

 

Upon the effectiveness of this waiver as set forth below, the Company
and the undersigned purchaser agree as follows:

 

(a)          The rights of all the holders of the Preferred Shares
to payments described in Section 7(c)(ii) of the Certificate of
Designation are irrevocably waived.

 

(b)         The rights of all the holders of the Preferred Shares
under Sections 3, 8(a), 8(c), 8(e), 8(h) and 9 of the Certificate of
Designation are irrevocably waived.

 

(c)          Section 1 of each Warrant shall be amended to
read in its entirety as follows:

 

“Term.  The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on September 15, 2003 and expire at 5:00
p.m., eastern time, on April 30, 2008 (such period being the “Term”).”

 

(d)         Section 2(a) of each Warrant shall be amended to
read in its entirety as follows:

 

 

“Time to Exercise.  The purchase rights represented by this
Warrant may be exercised in whole or in part during the Term commencing on
September 15, 2003 and expiring on April 30, 2008.”

 

(e)          Sections 2(f), 4 and 5 of each Warrant shall be
deleted in their entirety.

 

(f)            Section 8(c)(ii) of each Warrant shall be amended
to read in its entirety as follows:

 

“(ii) The Issuer shall not be obligated
to issue shares of Common Stock to any Holder in excess of the number of shares
of Common Stock representing such Holder’s Pro Rata Maximum (as defined in
the Purchase Agreement) of the Issuable Maximum as set forth on
Schedule 3.16 of the Purchase Agreement.”

 

(g)         Notwithstanding Section 3.12 of the Purchase
Agreement, the holders of the Preferred Shares shall have no rights to
participate in any Subsequent Financing other than in the Next Financing.  The “Next Financing” shall be the next sale
to any third party of Common Stock or securities convertible, exercisable or
exchangeable into Common Stock, including convertible debt securities (collectively,
the “Financing Securities”), following September 9, 2003, other than a
Permitted Financing.  In connection with
the Next Financing, notwithstanding Section 3.12 of the Purchase
Agreement, the Rights Notice shall only provide the Purchasers an option during
the two (2) trading days following delivery of the Rights Notice to inform the
Company in writing whether the Purchasers will purchase any of the securities
being offered in the Next Financing on the same terms and conditions as
contemplated by the Next Financing. 
Each Purchaser will only be entitled to purchase securities being
offered in the Next Financing having an aggregate purchase price not to exceed
the amount invested by such Purchaser on April 30, 2003.  If the aggregate size of the Next Financing
is less than $5,485,000, then the investment amount that such Purchaser can
make shall be reduced by a pro rata amount. 
Appropriate amendments are hereby deemed to be made to Section 3.12
to effect the foregoing.

 

(h)         Sections 3.13 and 3.15 of the Purchase Agreement
shall be deleted in their entirety.

 

(i)             Section 3.16 of the Purchase Agreement shall be
amended to read in its entirety as follows:

 

“The Issuer shall not be obligated to issue in excess of the Issuable
Maximum (as defined in the Warrants and Certificate of Designation).  Each Purchaser’s and the Other Purchaser’s
pro rata portion of the Issuable Maximum based upon the number of shares
of Common

 

2

 

Stock issuable upon conversion or exercise of all Preferred Shares and
Warrants issued and sold at the Closing and upon conversion or exercise of all
the Other Preferred Shares and the Other Warrant issued and sold at the closing
under the Other Purchase Agreement is set forth on Schedule 3.16
hereto (as proportionately adjusted for stock splits, reverse stock splits,
stock combinations, the “Pro Rata Maximum”).”

 

Except as expressly provided herein, no term or provision of the
Transaction Documents shall be amended or otherwise modified, and each term or
provision of the Transaction Documents shall remain in full force and effect.

 

3

 

If you agree to the terms and provisions hereof, please evidence such
agreement by executing and returning this waiver and the attached letter
agreement via facsimile to Wave Systems Corp., at (413) 243-0391,
Attention to Gerard T. Feeney.

 

This waiver shall become effective as of the date first above written
if, and only if, on or before Friday, September 12, 2003, the Company
shall have received (i) counterparts of this waiver in substantially
identical form executed by the Company, the undersigned purchaser and (a) the
holders of at least three-fourths (3/4) of the aggregate
number of Preferred Shares and Other Preferred Shares outstanding (less the
aggregate number of Preferred Shares held by the undersigned purchaser) (the “Other
Required  Preferred  Holders”) and (b) the holders of
Warrants and the Other Warrant exercisable for at least three-fourths (3/4)
of the aggregate number of shares of Warrant Stock (as defined in the Warrants)
issuable under the Warrants and the Other Warrant (less the aggregate number of
shares of Warrant Stock issuable upon exercise of the Warrant held by the
undersigned purchaser) (the “Other  Required  Warrant  Holders”);
(ii) counterparts of the attached letter agreement executed by the
Company, the undersigned purchaser and the same Other Required Preferred
Holders and the Other Required Warrant Holders who executed counterparts of this
letter agreement in substantially identical form; (iii) the attached
Conversion Notice executed by the undersigned purchaser; (iv) the attached
Exercise Form executed by the undersigned purchaser; (v) original stock
certificate representing the Preferred Shares held by the undersigned purchaser
(the “Stock Certificate”); (vi) the original Warrant held by the undersigned
purchaser (the “Warrant Certificate”); and (vii) payment in full of the
exercise price for all of the shares of Warrant Stock issuable upon exercise of
the undersigned purchaser’s Warrant (as adjusted hereby).

 

The Conversion Notice, the Exercise Form, the Stock Certificate and the
Warrant Certificate should be delivered via overnight courier to the Company,
c/o Bingham McCutchen LLP, at 399 Park Avenue, New York New York 10022,
Attention to Matthew McMurdo.  The
Company shall inform the undersigned purchaser on Wednesday, September 10,
2003 of the adjusted amount of shares of Warrant Stock issuable upon exercise
of the undersigned purchaser’s Warrant and the cost thereof.  Payment for the Warrant Stock shall be made
by Friday, September 12, 2003 via wire transfer to the following:

 

Wave Systems Corp.

Bank ABA/Routing #:  021001088

Account #:  610185055

 

HSBC Bank

452 Fifth Avenue

New York, NY  10018

 

[Remainder of page intentionally left blank]

 

4

 

This waiver may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts (including by facsimile),
each of which counterparts shall be an original and all of which taken together
shall constitute one and the same waiver.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  WAVE SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed as of the date

  first above written:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

5

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