Document:

Exhibit
10.1

 

Subscription
Agreement

 

This Subscription Agreement (this “Agreement”)
is dated July 21, 2009, by and between the investor identified on the
signature page hereto (the “Investor”) and Wave Systems Corp., a
Delaware corporation (the “Company”), whereby the parties agree as
follows:

 

1.             Subscription.

 

(a)  Investor
agrees to buy and the Company agrees to sell and issue to Investor (i) such
number of shares (the “Shares”) of Class A common stock, par value $0.01
per share (“Common Stock”), and (ii) a Warrant, in substantially the form
delivered to the Investor herewith, to purchase such number of shares of Common
Stock (the “Warrants”) of the Company, set forth on the signature page hereto,
for an aggregate purchase price set forth on the signature page hereto
(the “Purchase Price”).  The
shares of Common Stock issuable upon exercise of the Warrants are referred to
herein as the “Warrant Shares”.

 

(b)  The Shares,
Warrants and Warrant Shares have been registered on a Registration Statement on
Form S-3, Registration No. 333-150340, which registration statement
(the “Registration Statement”) has been declared effective by the
Securities and Exchange Commission, has remained effective since such date and
is effective on the date hereof.

 

(c)  ON JULY 22,
2009 (THE “CLOSING DATE”), THE INVESTOR SHALL REMIT BY WIRE TRANSFER THE
AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SHARES AND
WARRANTS BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING ACCOUNT DESIGNATED BY
THE COMPANY:

 

Account:  Wave Systems Corp

HSBC
Bank

452
Fifth Avenue

New
York, NY 10018

Bank
ABA/Routing #  021001088

US
Govt MM Fund:  610185055

 

Such funds shall be
delivered unless (i) the Placement Agency Agreement (the “Placement
Agreement”) between the Company and the placement agent engaged by the
Company in connection with the sale and issuance of the Shares and Warrants (the
“Placement Agent”) is terminated pursuant to the terms thereof or (ii) the
conditions to closing in the Placement Agreement have not been satisfied.  The Company’s obligation to issue the Shares
and Warrants to the Investor will be subject to (i) the receipt by the
Company of the aggregate purchase price for the Shares and Warrant 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
Registration Statement remaining in effect and no stop order proceedings with
respect thereto being pending or threatened, and (iv) 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.  The Company proposes to enter into
substantially this same form of Agreement with certain other investors
(collectively with this Agreement, the “Transaction”) and the Investor’s
obligations are expressly not conditioned on the purchase by any or all such other
investors of the Shares and Warrants that they have agreed to purchase from the
Company.  The Company shall issue a press
release announcing the Transaction prior to 9:30am Eastern Time on the business
day immediately following the date hereof. 
The Placement Agent shall have no rights in or to any of the funds,
except in respect of the Company’s obligation to pay the Placement Agent’s
fees.

 

 

(d)  NO LATER
THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE
INVESTOR AND THE COMPANY, THE INVESTOR SHALL DIRECT THE BROKER-DEALER AT WHICH
THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE MAINTAINED TO SET UP
A DEPOSIT/WITHDRAWAL AT CUSTODIAN (“DWAC”) INSTRUCTING THE TRANSFER
AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES ON THE CLOSING DATE.

 

(e)  On the
Closing Date, the Company shall deliver to Investor (i) the Shares via the
Depository Trust Company’s (“DTC”) Deposit or Withdrawal at Custodian
system via the DTC instructions set forth on the signature page hereto and
(ii) the Warrants in physical, certificated form to the address set forth
on the signature page hereto, such Shares and Warrants to be registered in
such name or names as designated by the Investor on the signature page hereto. 
The Shares and Warrants shall be unlegended and free of any resale
restrictions.

 

2.             Company Representations and Warranties.  The Company represents and
warrants that: (a) it has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder; (b) this Agreement
has been duly authorized and executed by and constitutes a valid and binding
agreement of the Company enforceable in accordance with its terms; (c) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not conflict with or result in a breach of (i) the
Company’s Restated Certificate of Incorporation or Restated By-Laws, or (ii) any
material agreement to which the Company is a party or by which any of its
property or assets is bound; (d) the Shares, Warrants and Warrant Shares have
been duly authorized for sale and issuance, and when the Shares and Warrant
Shares are issued and delivered by the Company against payment therefor
pursuant to this Subscription or the Warrants, as the case may be, will be
validly issued, fully paid and nonassessable; (e) the Registration
Statement and any post-effective amendment thereto, at the time it became
effective, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (f) the prospectus contained in the
Registration Statement, as amended or supplemented, did not contain as of the
effective date thereof, and as of the date hereof does not contain, any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (g) there are no preemptive rights or
rights of first refusal held by stockholders of the Company and applicable to
the transactions contemplated hereby.

 

3.             Investor Representations,
Warranties and Acknowledgments.  The Investor
represents and warrants that: (a) it has full right, power and authority
to enter into this Agreement and to perform all of its obligations hereunder; (b) this
Agreement has been duly authorized and executed by the Investor and constitutes
a valid and binding agreement of the Investor enforceable against the Investor
in accordance with its terms; (c) the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby do not conflict
with or result in a breach of (i) the Investor’s certificate of
incorporation or by-laws (or other governing documents), or (ii) any
material agreement or any law or regulation to which the Investor is a party or
by which any of its property or assets is bound; (d) the Investor hereby
confirms that it has had full access to and relied only upon the Disclosure
Package, including the Company’s periodic reports and other information
incorporated by reference therein, and was able to read, review, download and
print such materials. For purposes hereof, the term “Disclosure Package”
means: (i) a base prospectus dated June 23, 2008, (ii) if
applicable, a preliminary prospectus supplement related to the offering, (iii) the
final prospectus supplement related to the offering, and (iv) the pricing
information contained in this Agreement; and (e) 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 and Warrant,
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 Shares and Warrant.

 

4.             Miscellaneous.

 

(a)  This Agreement
constitutes the entire understanding and agreement between the parties with
respect to its subject matter, and there are no agreements or understandings
with respect to the subject matter hereof which are not contained in this Agreement. 
This Agreement may be amended or modified only in writing signed by the parties
hereto.

 

(b)  This Agreement
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same
counterpart.  Execution may be made by delivery by facsimile or pdf sent
via electronic transmission.

 

(c)  The
provisions of this Agreement are severable and, in the event that any court or
officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and enforceable
to the maximum extent possible, so long as such construction does not
materially adversely effect the economic rights of either party hereto.

 

(d)  All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing and shall be mailed, hand delivered, sent by a
recognized overnight courier service such as Federal Express, or sent via
facsimile and confirmed by letter, to the party to whom it is addressed at the
following addresses or such other address as such party may advise the other in
writing:

 

To the Seller:  as
set forth on the signature page hereto.

 

To the Buyer:  as
set forth on the signature page hereto.

 

All notices hereunder
shall be effective upon receipt by the party to which it is addressed.

 

(e)  This Agreement
shall be governed by and interpreted in accordance with the internal laws of
the State of New York for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of
laws. 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) 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.

 

 

(f)  The Company
agrees that the Investor shall be a third party beneficiary of the representations,
warranties, covenants and agreements given by the Company in the Placement
Agreement.

 

(g)  This Agreement
shall not be assigned by any party hereto, without the express prior written
consent of the Company or the Investor.

 

 

If the foregoing
correctly sets forth our agreement, please confirm this by signing and
returning to us the duplicate copy of this Agreement.

 

	
   

  	
  WAVE
  SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Steven K. Sprague

  
	
  Number
  of Shares:

  	
   

  	
  Title:Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares underlying the Warrant:

  	
   

  
	
  (such
  number to be equal to       % of the aggregate number
  of Shares being purchased by the Investor)

  	
   

  

 

	
  Purchase Price Per Share:     $

  	
   

  	
  Address
  for Notice:

  
	
   

  	
   

  	
   

  
	
  Warrant Exercise Price:   
      $

  	
   

  	
  Wave
  Systems Corp.

  
	
   

  	
   

  	
   

  
	
  Aggregate Purchase Price:    $

  	
   

  	
  480 Pleasant Street

  
	
   

  	
   

  	
  Lee, Massachusetts 01238

  
	
  INVESTOR:
                                                                      

  	
   

  	
  Attention:
  Chief Executive Officer

  
	
   

  	
   

  	
  Facsimile: 413-243-0045

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address
  for Notice and Delivery of Warrants:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DWAC
  Instructions:

  	
   

  	
   

  	
   

  
	
  Name of DTC
  Participant:

  	
   

  	
   

  	
   

  	
   

  
	
  DTC Participant
  Number:

  	
   

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
   

  	
   

  
						

 

 

NO LATER THAN ONE (1) BUSINESS
DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE
INVESTOR SHALL DIRECT THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE
CREDITED WITH THE SHARES ARE MAINTAINED TO SET UP A DEPOSIT/WITHDRAWAL AT
CUSTODIAN (“DWAC”) INSTRUCTING THE TRANSFER AGENT TO CREDIT SUCH ACCOUNT
OR ACCOUNTS WITH THE SHARES ON THE CLOSING DATE.

 

ON THE CLOSING DATE, THE INVESTOR
SHALL REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE
PURCHASE PRICE FOR THE SHARES AND WARRANTS BEING PURCHASED BY THE INVESTOR TO
THE FOLLOWING ACCOUNT:

 

Account:  Wave Systems Corp

HSBC Bank

452 Fifth Avenue

New York, NY 10018

Bank ABA/Routing #  021001088

US Govt MM Fund:  610185055Exhibit 10.2

 

PLACEMENT AGENCY AGREEMENT

 

July 21, 2009

 

Roth
Capital Partners, LLC

24
Corporate Plaza

Newport
Beach, CA 92660

 

Ladies
and Gentlemen:

 

Wave Systems Corp., a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions herein, to issue and sell an
aggregate of up to $1,648,400 in shares (the “Shares”) of its Class A
Common Stock, $0.01 par value per share (the “Common Stock”) and
warrants to purchase shares of Common Stock (the “Warrants” and,
collectively with the Shares, the “Securities”) in the form attached
hereto as Exhibit A, directly to various investors (collectively, the “Investors”).  The Common Stock issuable upon exercise of
the Warrants is herein referred to as the “Warrant Shares.”

 

The Company hereby confirms its agreement with the
Placement Agent as follows:

 

Section 1.                                          Agreement
to Act as Placement Agent.

 

(a)                                  On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to all the terms and conditions of this Agreement between the
Company and Roth Capital Partners, LLC (“Roth Capital”), Roth Capital
shall be the Company’s exclusive placement agent (in such capacity, the “Placement
Agent”), on a best efforts basis, in connection with the issuance and sale
by the Company of the Securities in the proposed takedown from a shelf
registration statement on Form S-3 (Registration Statement No. 333-150340)
(the “Registration Statement”), with the terms of such takedown to be
subject to market conditions and negotiations between the Company, Roth Capital
and the prospective Investors (such takedown shall be referred to herein as the
“Offering”).  As compensation for
services rendered, and provided that any of the Securities are sold to
Investors in the Offering, on the Closing Date (as defined below) of the
Offering, the Company shall pay to the Placement Agent an amount equal to (a) 6.0%  and 2.0% (non-accountable) (for a total of
8.0%) of the gross proceeds received by the Company from the sale of the
Securities; and (b) the Placement Agent’s out-of-pocket Financial Industry
Regulatory Authority (“FINRA”)-related legal expenses in excess of
$20,000, up to a maximum of $7,500.

 

This Agreement shall not give rise to any commitment
by the Placement Agent to purchase any of the Securities, and the Placement
Agent shall have no authority to bind the Company.  The Placement Agent shall act on a best
efforts basis to solicit offers to purchase the Securities and to procure
performance by the Investors in the Securities; provided,
however that the Placement Agent does not guarantee that it will be
able to raise new capital in the prospective Offering.  The Company acknowledges that any advice
given by Roth Capital to the Company is solely for the benefit and use of the
Board of Directors of the Company and may not be used, reproduced,
disseminated, quoted or referred to, without the Placement Agent’s prior
written consent.  The Placement Agent
may, with the prior written consent of the Company, retain other brokers or
dealers to act as sub-agents on its behalf in connection with any Offering.

 

 

(b)                                 The term of the
Placement Agent’s exclusive engagement will be six months; however, the Company
may terminate the engagement at any time upon 5 days written notice to the
Placement Agent.  Upon termination, the
Placement Agent will be entitled to collect all fees earned and, to the extent
provided herein, to be reimbursed for expenses incurred through the date of
termination.  Nothing in this Agreement
shall be construed to limit the ability of the Placement Agent or its
affiliates to pursue, investigate, analyze, invest in, or engage in investment
banking, financial advisory or any other business relationship with entities or
persons other than the Company.

 

Section 2.                                          Representations,
Warranties and Agreements of the Company.

 

The Company hereby represents, warrants and
covenants to the Placement Agent as of the date hereof, and as of the Closing
Date of the Offering, as follows:

 

(a)                                  Securities
Law Filings.  The Company
has filed with the Securities and Exchange Commission (the “Commission”) the
Registration Statement, which became effective on June 23, 2008, for the
registration under the Securities Act of 1933, as amended (the “Act”),
of the Securities.  On the date of the
filing of the Registration Statement and the date on which the Registration
Statement became effective, the Company met the requirements for use of Form S-3
under the Act.  Such registration
statement meets the requirements set forth in Rule 415(a)(1)(x) under
the Act and complies in all other material respects with said Rule.  The Company will file with the Commission
pursuant to Rule 424(b) under the Act a supplement to the form of
prospectus included in such registration statement relating to a placement of
the Securities and the plan of distribution thereof and the Company has advised
the Placement Agent of all further material information (financial and other)
with respect to the Company to be set forth therein.  Such registration statement, including the
exhibits thereto, as amended at the date of this Agreement, is hereinafter
called the “Registration Statement”; such prospectus, in the form in
which it appears in the Registration Statement, is hereinafter called the “Base
Prospectus”; and the supplemented form of prospectus, in the form in which it
will be filed with the Commission pursuant to Rule 424(b), is hereinafter
called a “Prospectus Supplement.” 
Any reference herein to the Registration Statement, the Base Prospectus
or the Prospectus Supplement shall be deemed to refer to and include the
documents incorporated by reference therein (the “Incorporated Documents”)
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), on or before the
date of this Agreement, or the issue date of the Base Prospectus or Prospectus
Supplement, as the case may be; and any reference herein to the terms “amend,” “amendment”
or “supplement” with respect to the Registration Statement, the Base Prospectus
or the Prospectus Supplement shall be deemed to refer to and include the filing
of any document under the Exchange Act after the date of this Agreement and
prior to the time of the Closing (as defined below), or the issue date of the
Base Prospectus or the Prospectus Supplement, as the case may be, deemed to be
incorporated therein by reference.  All
references in this Agreement to financial statements and schedules and other
information which is “contained,” “included” or “stated” in the Registration
Statement or the Prospectus Supplement (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus Supplement, as the
case may be.

 

(b)                                 No Stop
Order.  No stop order suspending the
effectiveness of the Registration Statement or the use of the Base Prospectus
or the Prospectus Supplement has been issued, and no proceeding for any such
purpose is pending or has been initiated or, to the Company’s knowledge, is
threatened by the Commission.

 

(c)                                  Compliance
with Applicable Regulations.  The Registration Statement (and any further
documents to be filed with the Commission) contains all exhibits and schedules
as required by the Act.  

 

 

Each of the Registration
Statement and any post-effective amendment thereto, at the time it became
effective, complied in all material respects with the Act and the Exchange Act
and the applicable rules and regulations of the Commission thereunder and
did not and, as amended or supplemented, if applicable, will not, contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.  Each of the Base Prospectus
and the Prospectus Supplement, as of its respective date, complied in all
material respects with the Act and the Exchange Act and the applicable rules and
regulations of the Commission thereunder. 
Each of the Base Prospectus and the Prospectus Supplement, as amended or
supplemented, did not and will not contain as of the effective date thereof any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. 
The Incorporated Documents, when they were filed with the Commission,
conformed in all material respects to the requirements of the Exchange Act and
the applicable rules and regulations of the Commission thereunder, and
none of such documents, when they were filed with the Commission, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Base Prospectus or
Prospectus Supplement prior to the Closing, when such documents are filed with
the Commission, will conform in all material respects to the requirements of
the Exchange Act and the applicable rules and regulations of the
Commission thereunder, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading.  Notwithstanding
the foregoing, the Company makes no representations or warranties as to the
information contained in or omitted from the Prospectus Supplement or any
amendment thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Placement Agent specifically for use in the Registration Statement or the
Prospectus Supplement.  No post-effective
amendment to the Registration Statement reflecting any facts or events arising
after the effective date thereof which represent, individually or in the
aggregate, a fundamental change in the information set forth therein is
required to be filed with the Commission.

 

(d)                                 Reports
and Documents, etc.  There are
no documents required to be filed with the Commission in connection with the
transaction contemplated hereby that (x) have not been filed as required
pursuant to the Act or (y) will not be filed within the requisite time
period.  There are no contracts or other
documents required to be described in the Prospectus Supplement, or to be filed
as exhibits or schedules to the Registration Statement, which have not been
described or filed as required.

 

(e)                                  Offering
Materials Furnished to the Placement Agent.  The Company has delivered, or will as promptly
as practicable deliver, to the Placement Agent complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed as
a part thereof, and conformed copies of the Registration Statement (without
exhibits) and the Base Prospectus and the Prospectus Supplement, as amended or
supplemented, in such quantities and at such places as the Placement Agent
reasonably requests.

 

(f)                                    Distribution
of Offering Material.  The Company
has not distributed and will not distribute, prior to the Closing Date, any
offering material in connection with the offering and sale of the Securities
other than the Base Prospectus and the Prospectus Supplement or the
Registration Statement and copies of the documents incorporated by reference
therein.  For the avoidance of doubt, any
other material prepared and distributed solely by the Placement Agent is not
deemed to be distributed by the Company for purposes of this paragraph (f).

 

(g)                                 The
Placement Agency Agreement.  This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable against the Company in accordance with its terms, except
as rights to indemnification and contribution hereunder 

 

 

may be limited by applicable
law and except as the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.

 

(h)           Authorization of the
Securities.  The Securities
have been duly authorized for issuance and sale, and the Shares, when issued
and delivered by the Company to the Investors against payment therefor pursuant
to this Agreement, will be validly issued, fully paid and nonassessable.  The Warrant Shares have been duly authorized
and reserved for issuance pursuant to the terms of the Warrants, and the
Warrant Shares, when issued by the Company upon the valid exercise of the
Warrants and payment of the exercise price, will be duly issued, fully paid and
nonassessable.

 

(i)            No Material Adverse Change.  Subsequent to the respective dates as of
which information is given in the Base Prospectus and in any Prospectus
Supplement:  (i) there has been no
material adverse change or effect, or any development that could reasonably be
expected to result in a material adverse change or effect, in the condition,
financial or otherwise, or in the earnings, business, operations or prospects
of the Company and the Subsidiaries (as defined below) taken as a whole (any
such change or effect, where the context so requires, is called a “Material
Adverse Change” or a “Material Adverse Effect”); (ii) the
Company and the Subsidiaries have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
capital stock or repurchase or redemption by the Company of any class of
capital stock.

 

(j)            Independent Accountants.  KPMG LLP, which has expressed its opinion
with respect to the financial statements (which term as used in this Agreement
includes the related notes and schedules thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and
incorporated by reference in the Prospectus Supplement, is an independent
registered public accounting firm as required by the Act and the Exchange Act.

 

(k)           Preparation of the
Financial Statements.  The
financial statements filed with the Commission as a part of the Registration
Statement or included or incorporated by reference in the Base Prospectus or
Prospectus Supplement present fairly the financial position of the Company and
its consolidated Subsidiaries as of and at the dates indicated and the results
of their operations and cash flows for the periods specified therein.  The supporting exhibits and schedules included
in the Registration Statement, if any, present fairly the information required
to be stated therein subject to the normal year-end adjustments which are not
expected to be material in amount.  The
assumptions used in preparing the pro forma financial statements, if any,
provide a reasonable basis for presenting the significant effects attributable
to the transactions or events described therein, any related pro forma
adjustments comply with Regulation G and give appropriate effect to the
assumptions, and the pro forma columns and reconciliations therein reflect the
proper application of adjustments to the corresponding historical financial
statements.  Such financial statements
and supporting schedules, if any, have been prepared in conformity with generally
accepted accounting principles as applied in the United States (“GAAP”),
as applicable, applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto and comply in
all material respects with the Act, the Exchange Act and the applicable rules and
regulations of the Commission thereunder. 
No other financial statements or supporting schedules or exhibits are
required by the Act or the rules and regulations of the Commission
thereunder to be included in the Registration Statement or the Prospectus
Supplement.

 

(l)            Incorporation and Good
Standing.  Each of the Company
and its subsidiaries set forth in Exhibit B hereto (the “Subsidiaries”)
has been duly organized and is validly existing and, as applicable, is a
corporation in good standing under the laws of its jurisdiction of
incorporation with full corporate power 

 

 

and authority to own its
properties and other assets and conduct its business as described in the
Prospectus Supplement, and is duly qualified or licensed to do business as a
foreign corporation and, as applicable, is in good standing under the laws of
each jurisdiction which requires such qualification or license, except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect.

 

(m)          Capitalization and Other
Capital Stock Matters.  The
authorized, issued and outstanding capital stock of the Company is as set forth
in the Registration Statement and in each Prospectus Supplement (other than for
issuances after the dates thereof, if any, pursuant to employee benefit plans
described in any Prospectus Supplement or upon exercise of outstanding options
or warrants described in any Prospectus Supplement).  The Securities conform in all material respects
to the description thereof contained in the Base Prospectus and the Prospectus
Supplement.  As of June 30, 2009,
there were 67,417,834 shares of common stock outstanding.  Since June 30, 2009, the Company has not
issued any securities other than (i) Common Stock of the Company pursuant
to the exercise of previously outstanding options in connection with the
Company’s employee stock purchase and option plans (the “Plans”),
outstanding warrants and other outstanding obligations, (ii) options
granted pursuant to the Plans in the ordinary course of business consistent
with past practice, in each case as disclosed in the Base Prospectus and each
Prospectus Supplement, and (iii) 3,448,042 shares of Class A common
stock and warrants to purchase 1,724,024 shares of Class A common stock
pursuant to a Prospectus Supplement dated July 16, 2009.  All the issued and outstanding shares of the
capital stock of the Company and the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance, in all material respects, with federal and state securities laws,
as applicable.  Except as set forth in
the Base Prospectus and each Prospectus Supplement, all of the outstanding
shares of capital stock of the Subsidiaries are owned, directly or indirectly,
by the Company.  None of the outstanding
shares of capital stock of the Company or any Subsidiary were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities. 
There are no authorized or outstanding options, warrants, preemptive
rights, rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any Subsidiary other than those described in the Base
Prospectus and each Prospectus Supplement. 
The description of the Company’s stock option, stock bonus and other
stock plans or arrangements, and the options, warrants or other rights granted
thereunder, set forth in the Base Prospectus and the Prospectus Supplement
accurately and fairly presents the information required by the Act to be shown
with respect to such plans, arrangements, options and rights.  Except as set forth in the Base Prospectus or
in any Prospectus Supplement, the Company does not have any subsidiaries or own
directly or indirectly any of the capital stock or other equity or long-term
debt securities or have any equity interest in any other person.

 

(n)           Stock Exchange Listing.  The Common Stock is registered under the
Exchange Act and is lised on the NASDAQ Capital Market (“NASDAQ”), and
the Company has taken no action designed to, or likely to have the effect of
terminating the registration of the Common Stock under the Exchange Act or
suspending from trading the Common Stock from NASDAQ, nor has the Company
received any information suggesting that the Commission or FINRA is
contemplating terminating or suspending such registration or quotation.

 

(o)           No Transfer Taxes or Other
Fees.  There are no transfer
taxes or other similar fees or charges under United States law or the laws of
any state or any political subdivision thereof, required to be paid in
connection with the execution and delivery of this Agreement or the issuance
and sale by the Company of the Securities.

 

(p)           No Price Stabilization or
Manipulation.  The Company has
not taken and will not take, directly or indirectly, any action designed to or
that could reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities.

 

 

(q)                                 Blue
Sky; FINRA Matters.  The
Securities have been or will be qualified for sale under the securities laws of
such jurisdictions (United States and foreign) as the Placement Agent and the
Investors determine, or are or will be exempt from the qualification and
broker-dealer requirements of such jurisdictions.

 

Any certificate signed by an officer of the Company
and delivered to the Placement Agent in connection herewith or in connection
with the Offering shall be deemed to be a representation and warranty by the
Company to the Placement Agent as to the matters set forth therein.

 

Section 3.                                          Delivery
and Payment.

 

On July 22, 2009 (the “Closing Date”),
each of the Investors will remit by wire transfer to an account designated by
the Company an amount equal to the aggregate purchase price for the Securities
purchased by such Investor as set forth on the signature page to the
Subscription Agreement (each a “Subscription Agreement”) entered into
between the Company and each of the Investors. 
At 10:00 a.m., California time or at such other time on the Closing
Date as may be agreed upon by the Company and the Placement Agent, the Company
shall deliver to each Investor (i) the Shares purchased by such Investor
via the Depository Trust Company’s (“DTC”) Deposit or Withdrawal at
Custodian system via the DTC instructions set forth on the signature page of
such Investor’s Subscription Agreement and (ii) the Warrants in physical,
certificated form to the address set forth on the signature page of such
Investor’s Subscription Agreement, such Shares and Warrants to be registered in
such name or names as designated by the Investor on the signature page to
the Subscription Agreement.  The closing
of the takedown (the “Closing”) shall take place at the Company’s
principal executive offices or at the offices of the Company’s legal
counsel.  All actions taken at the
Closing shall be deemed to have occurred simultaneously.

 

Section 4.                                          Covenants
of the Company.

 

The Company further covenants and agrees with the
Placement Agent as follows:

 

(a)                                  Registration
Statement Matters.  During the
period beginning on the date hereof and ending at the time of the Closing (such
period being referred to herein as the “Prospectus Delivery Period”),
the Company agrees to advise the Placement Agent promptly after it receives
notice thereof, of the time when any amendment to the Registration Statement
has been filed or becomes effective or any supplement to the Prospectus
Supplement or any amended Prospectus Supplement has been filed and to furnish
the Placement Agent with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus Supplement; to advise the
Placement Agent, promptly after it receives notices thereof (i) of any
request by the Commission to amend the Registration Statement or to amend or
supplement the Prospectus Supplement or for additional information and (ii) of
the issuance by the Commission, of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto or any
order directed at any Incorporated Document or any amendment or supplement
thereto or any order preventing or suspending the use of the Base Prospectus or
the Prospectus Supplement or any amendment or supplement thereto or any
post-effective amendment to the Registration Statement, of the suspension of
the qualification of the Securities for offering or sale in any jurisdiction,
of the institution or threatened institution of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus Supplement or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of the Base Prospectus or Prospectus
Supplement or suspending any such qualification, promptly to use its reasonable
best efforts to obtain the withdrawal of such order.

 

 

(b)           Blue Sky Compliance.  The Company will cooperate with the Placement
Agent and the Investors in endeavoring to qualify the Securities for sale or
satisfy any applicable exemption(s) for sale of the Securities under the
securities laws of such jurisdictions (United States and foreign) as the
Placement Agent and the Investors may reasonably request, and will furnish such
information and execute such applications and documents as may be reasonably
required for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to
file such a consent, and provided further that the Company shall not be
required to produce any new disclosure document other than the Prospectus
Supplement.  The Company will, from time to
time, prepare and file such statements, reports and other documents as are or
may be required to continue such qualifications in effect for so long a period
as the Placement Agent may reasonably request for distribution of the
Securities.

 

(c)           Amendments and Supplements
to the Prospectus Supplement and Other Securities Act Matters.  The Company will comply with the Act and the
Exchange Act, and the rules and regulations of the Commission thereunder,
so as to permit the completion of the distribution of the Securities as
contemplated in this Agreement, the Base Prospectus and any Prospectus
Supplement.  If during the Prospectus
Delivery Period, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of the Placement Agent or counsel for
the Placement Agent, it becomes necessary to amend or supplement the Base
Prospectus or any Prospectus Supplement in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus Supplement
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Base Prospectus or any Prospectus Supplement to
comply with any law, the Company promptly will prepare and file with the
Commission, and furnish at its own expense to the Placement Agent and to
dealers, an appropriate amendment to the Registration Statement or supplement
to the Base Prospectus or any Prospectus Supplement so that the Prospectus
Supplement as so amended or supplemented will not, in the light of the
circumstances existing at the time it is so delivered, be misleading, or so
that the Base Prospectus or any Prospectus Supplement will comply with such
law.  Before amending the Registration
Statement or supplementing the Base Prospectus in connection with the Offering,
the Company will furnish the Placement Agent with a copy of such proposed
amendment or supplement, allow the Placement Agent a reasonable amount of time
to review such proposed amendment or supplement and will not file any amendment
or supplement to which the Placement Agent reasonably objects in writing,
including via electronic mail.

 

(d)           Copies of any Amendments
and Supplements to the Prospectus Supplement.  The Company agrees to furnish the Placement
Agent, without charge, during the Prospectus Delivery Period, as many copies of
the Base Prospectus and Prospectus Supplement and any amendments and
supplements thereto (including any Incorporated Documents) as the Placement
Agent may reasonably request.

 

(e)           Use of Proceeds.  The Company shall apply the net proceeds from
the sale of the Securities sold by it in the manner described under the caption
“Use of Proceeds” in the Registration Statement or the applicable Prospectus
Supplement.

 

(f)            Transfer Agent.  The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.

 

(g)           Earnings Statement.  As soon as practicable and in accordance with
applicable requirements under the Act, but in any event not later than 18
months after the Closing Date of the Offering, the Company will make generally
available to its security holders and to the Placement Agent an earnings
statement, covering a period of at least 12 consecutive months beginning after
the Closing Date, that satisfies the provisions of Section 11(a) and Rule 158
under the Act.

 

 

(h)                                 Periodic
Reporting Obligations. 
During the Prospectus Delivery Period, the Company shall duly file, on a
timely basis, with the Commission all reports and documents required to be
filed under the Exchange Act within the time periods and in the manner required
by the Exchange Act.

 

(i)                                     Additional
Documents.  The Company
will enter into any subscription, purchase or other customary agreements as the
Placement Agent or the Investors deem necessary or appropriate to consummate
the Offering, all of which will be in form and substance reasonably acceptable
to the Placement Agent, the Investors and the Company.  The Company agrees that the Placement Agent
may rely upon, and is a third party beneficiary of, the representation and
warranties, and applicable covenants, set forth in any such purchase,
subscription or other agreement with Investors in the Offering.

 

Section 5.                                          Conditions
of the Obligations of the Placement Agent.

 

The obligations of the
Placement Agent hereunder shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 2
as of the date hereof and as of the Closing Date of the Offering as though then
made, to the timely performance by the Company of its covenants and other
obligations hereunder on and as of such dates, and to each of the following
additional conditions:

 

(a)                                  Compliance
with Registration Requirements; No Stop Order; No Objection from FINRA.  Each Prospectus Supplement shall have been
duly filed with the Commission in accordance with Rule 424(b); no stop
order suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; no order preventing or
suspending the use of any Prospectus Supplement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; no order having the effect of ceasing or suspending the
distribution of the Securities or any other securities of the Company shall
have been issued by any securities commission, securities regulatory authority
or stock exchange and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company,
contemplated by any securities commission, securities regulatory authority or
stock exchange; all requests for additional information on the part of the
Commission shall have been complied with; and FINRA shall have raised no
objection to the fairness and reasonableness of the placement agency terms and
arrangements.

 

(b)                                 Corporate
Proceedings.  All
corporate proceedings and other legal matters in connection with this
Agreement, the Registration Statement and each Prospectus Supplement, and the
registration, authorization, issue, sale and delivery of the Securities, shall
have been reasonably satisfactory to the Placement Agent’s counsel, and such
counsel shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to
in this Section 5.

 

(c)                                  No
Material Adverse Change. 
Subsequent to the execution and delivery of this Agreement and prior to
the Closing Date, there shall not have occurred any Material Adverse Change or
Material Adverse Effect, which, in the reasonable judgment of the Placement
Agent, makes it impracticable or inadvisable to proceed with the Offering on
the terms and in the manner contemplated by the applicable Prospectus
Supplement.

 

(d)                                 Opinion
of Counsel for the Company.  The Placement Agent shall have received on
the Closing Date of the Offering, and the Company shall cause to be delivered
to the Placement Agent an opinion of legal counsel to the Company in customary
form, dated the Closing Date, addressed to the Placement Agent.

 

 

(e)           Officers’
Certificate.  The
Placement Agent shall have received on the Closing Date a certificate of the
Company, in a form satisfactory to the Placement Agent, dated as of the Closing
Date signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that:

 

(i)            The
representations and warranties of the Company in this Agreement are true and
correct, as if made on and as of the Closing Date, and the Company has complied
with all the agreements and satisfied in all material respects all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date;

 

(ii)           No
stop order suspending the effectiveness of the Registration Statement or the
use of the Base Prospectus or the Prospectus Supplement has been issued and no
proceedings for that purpose have been instituted or are pending or, to the
Company’s knowledge, threatened under the Act; no order having the effect of
ceasing or suspending the distribution of the Securities or any other
securities of the Company has been issued by any securities commission,
securities regulatory authority or stock exchange in the United States and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, contemplated by any securities commission, securities
regulatory authority or stock exchange in the United States;

 

(iii)          When
the Registration Statement became effective and at all times subsequent thereto
up to the delivery of such certificate, the Registration Statement, the Base
Prospectus and each Prospectus Supplement and any amendments or supplements
thereto, and Incorporated Documents, when such documents became effective or
were filed with the Commission, contained all material information required to
be included therein by the Act and the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be, and in all
material respects conformed to the requirements of the Act and the Exchange Act
and the applicable rules and regulations of the Commission thereunder, as
the case may be, and the Registration Statement and the Base Prospectus and the
Prospectus Supplement, and any amendments or supplements thereto, did not and
do not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (provided, however, that the preceding representations and
warranties contained in this paragraph (iii) shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Placement Agent
expressly for use therein) and, since the effective date of the Registration
Statement, there has occurred no event required by the Act and the rules and
regulations of the Commission thereunder to be set forth in an amended or
supplemented Prospectus Supplement which has not been so set forth;

 

(iv)          Subsequent
to the respective dates as of which information is given in the Registration
Statement, the Base Prospectus and each Prospectus Supplement, there has not
been:  (a) any Material Adverse
Change; (b) any transaction that is material to the Company and the 

 

 

Subsidiaries taken as a whole, except transactions entered into in the
ordinary course of business; (c) any obligation, direct or contingent,
that is material to the Company and the Subsidiaries taken as a whole, incurred
by the Company or any Subsidiary, except obligations incurred in the ordinary
course of business; (d) any material change in the capital stock (except
changes thereto resulting from the exercise of outstanding stock options or
warrants) or outstanding indebtedness of the Company or any Subsidiary; (e) any
dividend or distribution of any kind declared, paid or made on the capital
stock of the Company; or (f) any loss or damage (whether or not insured)
to the property of the Company or any Subsidiary which has been sustained or
will have been sustained which has a Material Adverse Effect; and

 

(v)           The
Company has been subject to continuous disclosure requirements of the Exchange
Act for a period of at least 12 calendar months immediately preceding the
filing of the Registration Statement, has timely filed all reports required of
it to be filed under the Exchange Act during the past 12 calendar months and
the portion of the month in which the Registration Statement was filed, and as
of the date of the Base Prospectus and each Prospectus Supplement is currently
in compliance with such obligations.

 

(f)            Listing.  The Common Stock (including the Shares and
Warrant Shares) is registered under the Exchange Act and is or will as of the
Closing Date be listed on NASDAQ, and the Company has taken no action designed
to, or likely to have the effect of terminating the registration of the Shares
and Warrant Shares under the Exchange Act or suspending from trading the Shares
and Warrant Shares on NASDAQ, nor has the Company received any written
information suggesting that the Commission or the FINRA is contemplated
terminating such registration or quotation.

 

(g)           Compliance with Prospectus
Delivery Requirements.  The Company shall have
complied with the provisions of Sections 3 and 4(c) and (d) with
respect to the furnishing of Prospectus Supplements.

 

(h)           Additional
Documents.  On or
before the Closing Date, the Placement Agent and counsel for the Placement
Agent shall have received such information and documents as they may reasonably
require for the purposes of enabling them to pass upon the issuance and sale of
the Securities as contemplated herein, or in order to evidence the accuracy of
any of the representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.

 

If any condition specified in this Section 5 is
not satisfied in all material respects when and as required to be satisfied,
this Agreement may be terminated by the Placement Agent by notice to the
Company signed by the Placement Agent at any time on or prior to the Closing
Date, which termination shall be without liability on the part of any party to
any other party, except that Section 6 (Payment of Expenses), Section 7
(Reimbursement of Placement Agent’s Expenses), Section 8 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to
Survive Delivery) shall at all times be effective and shall survive such
termination.

 

Section 6.              Payment
of Expenses.

 

The Company agrees to pay all costs, fees and
expenses incurred in connection with the 

 

 

performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation:  (i) all
expenses incident to the issuance, delivery and qualification of the Securities
(including all printing and engraving costs); (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock; (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Securities; (iv) all fees and expenses of the Company’s
counsel, independent public or certified public accountants and other advisors;
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits, schedules, consents and certificates
of experts), the Base Prospectus, any Preliminary Prospectus and each
Prospectus Supplement, and all amendments and supplements thereto, and this
Agreement; (vi) all filing fees, reasonable attorneys’ fees and expenses
incurred by the Company or the Placement Agent in connection with qualifying or
registering (or verifying or obtaining exemptions from the qualification or
registration of) all or any part of the Securities for offer and sale under the
state securities or blue sky laws, and, if requested by the Placement Agent,
preparing and printing a “Blue Sky Survey,” an “International Blue Sky Survey”
or other memorandum, and any supplements thereto, advising the Placement Agent
of such qualifications, registrations and exemptions; (vii) the filing
fees incident to, and the reasonable fees and expenses of counsel for the
Placement Agent in connection with, the review and approval by FINRA of the
Placement Agent’s participation in the offering and distribution of the
Securities; (viii) the fees and expenses associated with including the
Shares and Warrant Shares for listing on NASDAQ; (ix) all costs and
expenses incident to the travel and accommodation of the Company’s employees on
the “roadshow,” if any; and (x) all other fees, costs and expenses
referred to in Part II of the Registration Statement.

 

Section 7.              Reimbursement
of Placement Agent’s Expenses.

 

Intentionally
Deleted.

 

Section 8.              Indemnification
and Contribution.

 

(a)           Indemnification
of the Placement Agent.  The
Company agrees to indemnify and hold harmless the Placement Agent, its officers
and employees, and each person, if any, who controls the Placement Agent within
the meaning of the Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Placement Agent or such
controlling person may become subject, under the Act, the Exchange Act, or
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based:  (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in the Base
Prospectus, any Preliminary Prospectus or the Prospectus Supplement (or any
amendment or supplement thereto), or the omission or alleged omission 

 

 

therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in
whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iv) in whole or in part upon any failure
of the Company to perform its obligations hereunder or under law; or (v) any
act or failure to act or any alleged act or failure to act by the Placement
Agent in connection with, or relating in any manner to, the Securities or the
Offering contemplated hereby, and which is included as part of or referred to
in any loss, claim, damage, liability or action arising out of or based upon
any matter covered by clause (i), (ii), (iii) or (iv) above, provided
that the Company shall not be liable under this clause (v) to the extent
that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken by such
Placement Agent through its bad faith or willful misconduct; and to reimburse
such Placement Agent and each such controlling person for any and all expenses
(including the reasonable fees and disbursements of one counsel chosen by the
Placement Agent) as such expenses are reasonably incurred by such Placement
Agent or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by the
Placement Agent expressly for use in the Registration Statement, the Base
Prospectus, any Preliminary Prospectus or the Prospectus Supplement (or any
amendment or supplement thereto).

 

(b)           Indemnification of the
Company, its Directors and Officers. 
The Placement Agent agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Act or the Exchange Act, against any loss, claim, damage, liability or
expense, as incurred, to which the Company, or any such director, officer or
controlling person may become subject, under the Act, the Exchange Act, or
other federal, state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Placement Agent; which consent shall not be
unreasonably withheld), insofar as such loss, claim, damage, liability or expense
(or actions in respect thereof as contemplated below) arises out of or is based
upon any untrue or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or Prospectus Supplement (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Preliminary Prospectus or
Prospectus Supplement (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by
such Placement Agent expressly for use therein and to reimburse the Company, or
any such director, officer or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director, officer or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action.  The indemnity agreement set
forth in this Section 8(b) shall be in addition to any liabilities
that the Placement Agent may otherwise have.

 

(c)           Information Provided by
the Placement Agent.  The
Company and each person, if any, who controls the Company within the meaning of
the Act or the Exchange Act, hereby acknowledges that the only information that
the Placement Agent will furnish to the Company expressly for use in any
Prelininary Propsectus or Prospectus Supplement (or any amendment or supplement
thereto) are the statements regarding the Placement Agent set forth under the
caption “Plan of Distribution” in the Prospectus Supplement.

 

 

(d)           Notifications and Other
Indemnification Procedures. 
Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not relieve
it from any liability, which it may have to any indemnified party for
contribution to the extent it is not prejudiced as a proximate result of such
failure.  In case any such action is
brought against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties.  Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party’s election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless:  (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
local counsel), approved by the indemnifying party), representing the
indemnified parties who are parties to such action); (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action; or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.

 

(e)           Settlements.  The indemnifying party under this Section 8
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent or if there be a final non-appealable judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such settlement
or judgment.  No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes:  (i) an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding; and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.

 

(f)            Contribution.  If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect the relative benefits received by
such party on the one hand and the Placement Agent on the other from the
offering of the Securities.  If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law then each indemnifying party shall 

 

 

contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of such
indemnifying party on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations.  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, its directors,
its officers or its controlling persons on the one hand or the Placement Agent
on the other and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

 

The Company and Placement Agent agree that it would
not be just and equitable if contributions pursuant to this Section 8(f) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 8(f).  The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 8(f):  (i) the Placement Agent shall not be
required to contribute any amount in excess of the amount of the placement
agent fees actually received by such Placement Agent pursuant to this
Agreement; and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

(g)           Timing of Any Payments of
Indemnification.  Any losses,
claims, damages, liabilities or expenses for which an indemnified party is
entitled to indemnification or contribution under this Section 8 shall be
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred, but in all cases, no later than
forty-five (45) days of invoice to the indemnifying party.

 

(h)           Acknowledgements of
Parties.  The parties to this
Agreement hereby acknowledge that they are sophisticated business persons who
were represented by counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this Section 8,
and are fully informed regarding said provisions.  They further acknowledge that the provisions
of this Section 8 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement, any Preliminary
Prospectus and the Prospectus Supplement as required by the Act and the
Exchange Act.

 

Section 9.                                            Covenants of the Placement Agent

 

(a)           The Placement Agent has not distributed and will not
distribute any offering material in connection with the Offering and sale of
the Securities other than the Base Prospectus, any Prelininary Prospectus and
the Prospectus Supplement or the Registration Statement and copies of the
documents incorporated by reference therein and the Subscription Agreement in
the form approved by the Company.

 

(b)           The Placement Agent will not use or refer to any materials
on the Company’s website in connection with the offering and sale of the
Securities.

 

Section 10.                                     Representations and Indemnities
to Survive Delivery.

 

The respective indemnities, agreements,
representations, warranties and other statements of the Company or any person
controlling the Company, including its officers and directors, and of the 

 

 

Placement Agent set forth in
or made pursuant to this Agreement, including, but not limited to the indemnity
and contribution agreements contained in Section 8, will remain in full
force and effect, regardless of (i) any investigation made by or on behalf
of any Placement Agent or any person controlling such Placement Agent, the
Company, its directors or officers or any persons controlling the Company; (ii) delivery
and acceptance of any Securities and payment therefor hereunder; and (iii) any
termination of this Agreement.  A
successor to any Placement Agent, or to the Company, its directors or officers
or any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section 8.

 

Section 11.            Notices.

 

All
communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:

 

If to the Placement Agent:

 

Roth Capital Partners, LLC

24 Corporate Plaza

Newport Beach, California 92660

Facsimile:  (949) 720-7215

Attention:  Managing Director

 

With
a copy to:

 

K&L
Gates LLP

10100
Santa Monica Boulevard,

Seventh
Floor 

Los Angeles, California 90067

Facsimile:  (310) 552-5001

Attention:  Leib Orlanski, Esq.

 

If
to the Company:

 

Wave
Systems Corp.

480
Pleasant Street

Lee,
Massachusetts 01238

Facsimile:  413-243-0045

Attention:  Chief Executive Officer

 

With
a copy to:

 

Bingham
McCutchen LLP

399
Park Avenue

New
York, NY 10022-4689

Facsimile:  212-752-5378

Attention:  David Cosgrove, Esq.

 

Any party hereto may change
the address for receipt of communications by giving written notice to the
others.

 

 

Section 12.                                   Successors.

 

This Agreement will inure to the benefit of and be
binding upon the parties hereto, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8, and to
their respective successors, and personal representatives, and no other person
will have any right or obligation hereunder. 
Neither the Company nor the Placement Agent shall be entitled to assign
their rights, or delegate their responsibilities, hereunder without the prior
written consent of the other party hereto.

 

Section 13.                                   Partial
Unenforceability.

 

The
invalidity or unenforceability of any section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof.  If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

Section 14.                                   Governing
Law Provisions.

 

(a)                                  Governing
Law.  This agreement shall be
governed by and construed in accordance with the internal laws of the state of
New York applicable to agreements made and to be performed in such state.

 

(b)                                 Consent
to Jurisdiction.  Any legal
suit, action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby (“Related Proceedings”) may be instituted in
the federal courts of the United States of America located in New York County,
New York, or the courts of the State of New York in each case located in New
York County (collectively, the “Specified Courts”), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related Judgment”),
as to which such jurisdiction is non-exclusive) of such courts in any such
suit, action or proceeding.  Service of
any process, summons, notice or document by mail to such party’s address set
forth above shall be effective service of process for any suit, action or other
proceeding brought in any such court. 
The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.

 

Section 15.                                   General
Provisions.

 

This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect
to the subject matter hereof.  This
Agreement may be executed in two or more counterparts (including via facsimile
or pdf), each one of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.  This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit.  Section headings
herein are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.

 

[The remainder of this page has been intentionally left blank.]

 

[Signature Page Follows]

 

 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Company the
enclosed copies hereof, whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  WAVE
  SYSTEMS CORP.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven K.
  Sprague

  
	
   

  	
   

  	
  Name:
  Steven K. Sprague

  
	
   

  	
   

  	
  Title:
  Chief Executive Officer

  

 

The foregoing Placement Agency Agreement is hereby
confirmed and accepted by the Placement Agent as of the date first above
written.

 

ROTH
CAPITAL PARTNERS LLC

 

 

	
  By:

  	
  /s/ David Enzer

  	
   

  
	
   

  	
  Name: David Enzer

  	
   

  
	
   

  	
  Title: Managing
  Director

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