Document:

Exhibit 10.1

 

SUBSCRIPTION
AGREEMENT

 

December 24, 2008

 

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 (a) up
to 456 shares of Series K Convertible Preferred Stock (the “Total
Shares”), par value $0.01 per share (the “Series K Preferred Stock”)
for a purchase price of $2,800 per share (the “Purchase Price”) and (b) warrants,
in substantially the form attached hereto as Annex II (the “Warrants”
and, collectively, with the Total Shares, the “Securities”), to purchase
up to 1,140,000 shares of Class A
Common Stock of the Company, par value $0.01 per share (the “Common Stock”)
at an exercise price of $0.28 per share (the “Exercise Price”).  Investors will be issued Warrants to purchase
2,500 shares of Common Stock for each share of Series K Preferred Stock
purchased by such Investor.  The terms of
the Series K Preferred Stock will be set forth in the Certificate of
Designations substantially in the form attached hereto as Annex III (the “Certificate
of Designations”).

 

3.                                      The
offering and sale of the Securities (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. 333-150340) 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 Securities 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, for the aggregate purchase
price set forth below, (a) the number of shares of Series K Preferred
Stock set forth below (the “Investor Shares”) and (b) a Warrant to
purchase the number of shares of Common Stock set forth below (the “Investor
Warrant” and, collectively with the Investor Shares, the “Investor
Securities”).  The Investor
Securities shall be purchased pursuant to the Terms and Conditions for Purchase
of Securities attached hereto as Annex I and incorporated herein by this
reference as if fully set forth herein.

 

5.                                      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.”)

 

6.                                      The
Investor acknowledges that, prior to or in connection with the execution and
delivery of this Agreement, it has reviewed the final U.S. Base Prospectus,
dated June 23, 2008, which is a part of
the Company’s Registration Statement, and 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.

 

 

SIGNATURE PAGE

 

Number of Investor Shares:                    

 

Price Per Investor
Share:                                                              $2,800

 

Aggregate Purchase Price:                       

 

Shares of Common Stock issuable upon exercise
of Investor Warrant:                            

 

Exercise Price of Investor Warrant:        $0.28

 

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: December 24, 2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone #:

  	
   

  
	
   

  	
  Email:

  	
   

  
	
   

  	
   

  
	
  Agreed and
  Accepted

  	
   

  
	
  December 24,
  2008:

  	
   

  
	
   

  	
   

  
	
  WAVE SYSTEMS
  CORP.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name: Gerard
  T. Feeney

  	
   

  
	
  Title:   CFO

  	
   

  
								

 

 

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 Investor Shares and Warrant 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:

  
	
   

  	
   

  
	
  5.

  	
  The mailing address to which the Investor Share certificate and Warrant
  should be delivered:

  

 

 

ANNEX I

 

TERMS AND CONDITIONS FOR PURCHASE OF
SECURITIES

 

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

 

2.                                      Agreement
to Sell and Purchase the Investor Securities; Placement Agent.

 

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 Investor Shares and corresponding
Investor Warrants set forth on the last page of the Subscription Agreement
to which these Terms and Conditions for Purchase of Investor Securities 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 Securities to them as part of
the Offering (subject to Section 3.2(b) below).  The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the “Investors”.  The Company may complete sales of the
remaining Securities 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 the Securities 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 Securities and Funds.

 

3.1.                            Closing.  The completion of the purchase and sale of
the Securities (the “Closing”) will occur on or before December 30, 2008
(the “Closing Date”).  At the Closing: (a) the
Company will deliver (by overnight courier) a certificate representing the
number of shares of Series K Preferred Stock 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, (b) the Company will deliver (by
overnight courier) a Warrant to purchase the number of shares of Common Stock
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 (c) the aggregate purchase price for the Investor Securities
being purchased by the Investor will be paid by or on behalf of the Investor to
the Company by wire 

 

 

transfer
of immediately available funds to the account set forth on Annex IV hereto the
aggregate purchase price for the Investor Securities being purchased by the
Investor hereunder.

 

3.2.                            (a)                                  Conditions to the Company’s Obligations.  The Company’s obligation to issue the
Investor Securities to the Investor will be subject to (i) the receipt by
the Company of the aggregate purchase price for the Investor Securities being
purchased hereunder as set forth on the Signature Page, (ii) the accuracy
of the representations and warranties made by the Investor in this Agreement, (iii) the
fulfillment of those undertakings of the Investor to be fulfilled prior to the
Closing Date, (iv) the Registration Statement remaining in effect and no
stop order proceedings with respect thereto being pending or threatened, and (v) 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 Investor Securities will be subject to (i) the
filing by the Company of the Certificate of Designations with the Secretary of
State of the State of Delaware, substantially in the form attached hereto as
Annex III and (ii) the fulfillment of those other undertakings of the
Company with respect to the Investor Securities and/or the Investor to be
fulfilled prior to the Closing Date.  The
Investor’s obligations are expressly not conditioned on the purchase by any or
all of the Other Investors of the remaining Securities that they have agreed to
purchase from 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: (i) 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 Investor
Securities, including investments in securities 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 Investor Securities; (ii) 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 (iii) the Investor, in connection
with its decision to purchase the number of Investor Securities 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 Investor Securities, or
possession or distribution of offering materials in connection with the issue
of the Investor Securities, 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 Investor Securities or has in its possession or distributes
any offering material, in all cases at its own expense.  The Placement Agent is not 

 

 

authorized
to make and has not made any representation or use of any information in
connection with the issue, placement, purchase and sale of the Investor
Securities, 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: (i) 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 (ii) 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).

 

(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
Investor Securities 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 Investor Securities.

 

(e)                                  The
Investor acknowledges that the shares of Common Stock acquired upon the
exercise of the Investor Warrant or the conversion of the Investor Shares, if
not registered, will have restrictions on resale imposed by state and federal
securities laws.

 

(f)                                    The
Investor represents, warrants and agrees that, since the earlier to occur of (i) the
date on which either 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 (x) engaged
in any short selling, (y) established or increased any “put equivalent
position” as defined in Rule 16(a)-1(h) under the Securities
Exchange Act of 1934 or (z) granted any option for the purchase of or
entered into any hedging or similar 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 Investor Securities 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 electronic confirmation of
receipt and will be delivered and addressed as follows:

 

(a)                                  if to the Company, to:

 

WaveSystemsCorp.

480PleasantStreet

Lee,MA01238

Fax:(413)243-0391

ATTN:  Gerard T. Feeney, CFO

 

with copies to:

 

BinghamMcCutchenLLP

399ParkAvenue

NewYork,NY10022

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.

 

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 Investor Securities to
such Investor.

 

13.                               Entire Agreement.  This Agreement and
the Warrant 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.

 

 

ANNEX IV

 

Company
Wire Instructions

 

In accordance with section 3.1(b) of the
terms and conditions attached hereto as Annex I, remit by wire transfer the
amount of funds equal to the aggregate purchase price for the shares being
purchased by the investor to the following account:

 

Wire info for:  Wave Systems Corp

 

480 Pleasant Street

 

Lee, MA 01238

 

 

Account: 
Wave Systems Corp

 

HSBC Bank

 

452 Fifth Avenue

 

New York, NY 10018

 

 

Bank ABA/Routing #  021001088

 

US Govt MM Fund:  610185055

 

Contact: 
Will Aquino / Phone: 
212-525-8859   / Fax: 212-525-8924

 

International Transactions:  Use Swift #  
MRMDUS33Exhibit 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

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