Document:

Exhibit 10.1

 

SUBSCRIPTION
AGREEMENT

 

May 23, 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 2,151,250 shares of Class A Common
Stock (the “Total Shares”), par value $0.01 per share (the “Common
Stock”) for a purchase price of $0.80 per share (the “Purchase Price”)
and (b) warrants, in substantially form attached hereto as Annex II (the “Warrants”
and, collectively with the Total Shares, the “Securities”), to purchase
up to 537,812 shares of Common Stock at an exercise price of $0.85 per share
(the “Exercise Price”).

 

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. 333-141429) 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 Common 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 A and incorporated herein by this
reference as if fully set forth herein.

 

 

5.             The transaction for the purchase of the Investor
Shares will to settle via DVP (as defined below) UNLESS (a) you elect to receive your Investor Shares using
the Deposit Withdrawal Agent Commission (“DWAC”) system of the
Depository Trust Company or (b) you have a cash account with Security
Research Associates, Inc. (“SRA”) with sufficient cash to fund the
Purchase Price and you elect to settle through such account by initialing on
the following line:

 

             (Initial Here For Settlement through account
with SRA).

 

             (Initial Here For Settlement through DWAC)

 

“DVP” means delivery versus payment  through DTC (i.e., the Company shall deliver
Investor Shares registered in the Investor’s name and address as set forth
below and released by American Stock Transfer Corporation, the Company’s
transfer agent (the “Transfer Agent”), to the Investor at the Closing
directly to the account(s) at Security Research Associates, Inc.
through DTC and simultaneously therewith payment shall be made from such
account(s) by Security Research Associates, Inc. to the Company).

 

If you do not have an
existing account at Security Research Associates for settlement by DVP, we will
need the following information to be faxed to us along with your signature page to
this agreement.  Please fax your clearing information to Security Research
Associates at (866) 592-8132 (or as a back up 415-925-0264) to establish an
account with our clearing broker Wedbush Morgan Securities. Below is what we
will need to open your account.  A “New Account form” is attached in Exhibit B
for your convenience:

 

·              The exact registration name of the
account

 

·              Tax ID or Social Security number of
registered holder

 

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

 

·              Internal Account number at Prime Broker

 

·              Institutional and Agent ID

 

6.             The Investor represents that, except as set forth
below, (a) it has had no position, office or other material relationship
within the past three years with the Company or any of its affiliates and (b) it
has no direct or indirect affiliation or association with any NASD member.  Exceptions:

 

                                                                                                                                                            

(If no exceptions, write “none.” If left blank, response will be deemed
to be “none.”)

 

7.             The Investor 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 April 27, 2007, 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 

 

2

 

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.

 

3

 

SIGNATURE
PAGE

 

Number of Investor Shares:                        Shares issuable upon exercise of Warrant                       

 

Price Per Investor Share:  $
0.80                             Warrant
Exercise Price $ 0.85

 

Aggregate Purchase Price:  $

 

Please confirm that the foregoing correctly
sets forth the agreement between us by signing in the space provided below for
that purpose.

 

	
   

  	
  Dated as of: May 23, 2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone#:

  	
   

  
	
   

  	
  Email:

  	
   

  
								

 

Agreed and Accepted

May23, 2008:

 

WAVE SYSTEMS CORP.

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

4

 

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:

  	
   

  

 

If you have elected to
settle via DWAC, please include the following additional information:

 

	
  1.

  	
  Name of DTC Participant
  (broker-dealer at which the account or accounts to be credited with the
  Shares are maintained)

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  DTC Participant Number

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Name of Account at DTC
  Participant being credited with the Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Account Number at DTC
  Participant being credited with the Shares

  	
   

  

 

5

 

EXHIBIT B

 

Institutional DVP/RVP New Account Form.

 

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

 

Please Fax to SRA at:  (866) 592-8132 (or as a back up 415-925-0264)

Send “Attention Devon Wygaerts”

Devon can be reached at 415-925-0346.

 

	
  ACCOUNT #

  	
   

  	
  REP #

  	
   

  	
  TAX ID#

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

DVP INSTRUCTIONS:

 

	
  DTC #

  	
   

  	
  INSTITUTION #

  	
   

  	
  AGENT BANK #

  	
   

  	
  INTERNAL A/C #

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  SHORT NAME:

  	
   

  

 

	
  ORIGINAL
  CONFIRMATION:

  	
   

  
	
   

  
	
   

  

 

DUPLICATE
INSTRUCTIONS:

 

	
  INSTITUTION
  OR I/P#

  	
   

  
	
   

  
	
   

  

 

	
  TRIPLICATE
  INSTRUCTIONS:

  	
   

  
	
   

  
	
  SENT BY:

  	
   

  	
   

  	
  DATE:

  	
   

  
						

 

CONTACT INFORMATION:

 

	
  Name (Printed):

  	
   

  	
   

  
	
  Telephone #: 

  	
   

  	
   

  	
  Email Address:

  	
   

  
							

 

6

 

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 Agents.

 

2.1.         At the Closing (as defined in Section 3.1),
the Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions set forth herein, the number of Investor
Shares and corresponding Warrant 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 May 28, 2008 (the “Closing Date”).  At the Closing and in accordance with paragraph
5 of the Subscription Agreement: (a) the Company will cause the Transfer
Agent to deliver to the Investor the number of Investor Shares set forth on the
Signature Page registered in the name of the Investor or, if so indicated
on the Investor Questionnaire attached to the Subscription Agreement as Exhibit A,
in the name of a nominee designated by the Investor; (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 in the manner set forth in Section 3.3 below.

 

3.2.         (a)           Conditions to the Company’s Obligations.  The Company’s
obligation to issue the Investor Securities to the Investor will be subject to
the receipt by the Company of the aggregate purchase price for the Investor
Securities being purchased hereunder as set forth on the Signature Page, (b) the
accuracy of the representations and warranties made by the Investor in this
Agreement, (c) the fulfillment of those undertakings of the Investor to be
fulfilled prior to the Closing Date, (d) the Registration Statement
remaining in effect and no stop order proceedings with respect 

 

7

 

thereto being pending or threatened, and (e) there
being no objections raised by the staff of the NASDAQ Stock Market to the
consummation of the sale without the approval of the Company’s stockholders.

 

(b)           Conditions to the Investor’s
Obligations.  The
Investor’s obligation to purchase the Investor Securities will be subject to
the fulfillment of those 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.

 

3.3.         Delivery of Funds;
Delivery of Investor Shares.

 

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

 

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

 

(c)           If the Investor elects to settle the
Investor Securities purchased by such Investor by means of the DWAC system of
the Depository Trust Company, no later
than three (3) business days after the execution of this Agreement by the
Investor and the Company, the Investor shall (i) pay to the Company
by wire transfer of immediately available funds to the account set forth on
Annex III hereto the aggregate purchase price for the Shares being purchased by
the Investor hereunder and (ii) direct the broker-dealer at which the
account or accounts to be credited with the Shares being purchased by such
Investor are maintained, which broker/dealer shall be a DTC participant, to set
up a Deposit/Withdrawal at Custodian (“DWAC”) instructing American Stock
Transfer Corporation, the Company’s transfer agent, to credit such account or
accounts with the Shares by means of an electronic book-entry delivery.  Promptly following the delivery to the
Company of the purchase price for the Shares as described herein, the Company
shall direct its transfer agent to credit the Investor’s account or accounts
with the Shares pursuant to the information contained in the DWAC.

 

4.             Representations, Warranties and Covenants.

 

4.1.         Representations,
Warranties and Covenants of the Investor.

 

(a)           The Investor represents and warrants to,
and covenants with, the Company that: (a) the Investor is knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions
with respect to, investments in shares presenting an investment decision like
that involved in the purchase of the Investor Securities, including investments
in securities issued by the Company and 

 

8

 

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; (b) the
Investor has answered all questions on the Signature Page for use in the
Prospectus Supplement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; and (c) the
Investor, in connection with its decision to purchase the number of 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 have 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: (a) the Investor has
full right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement;
and (b) this Agreement constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

(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 represents, warrants and
agrees that, since the earlier to occur of (i) the date on which the
Placement Agent first contacted the Investor about the Offering and (ii) the
date that is the tenth (10th) trading day prior to the date of this
Agreement, it has not directly or indirectly (a) engaged in any
short selling, (b) established or increased any “put equivalent
position” as defined in Rule 16(a)-1(h) under the Securities
Exchange Act of 1934 or (c) granted any option for the purchase of or
entered into any hedging or similar 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 

 

9

 

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:

 

Wave Systems Corp.

480 Pleasant Street

Lee, MA 01238

Fax: (413) 243-0391

ATTN:  Gerard Feeney, CFO

 

with copies to:

 

Bingham McCutchen LLP

399 Park Avenue

New York, NY 10022

Fax: (212) 752-5378

ATTN:  Neil W. Townsend

 

(b)           if to the Investor, at its address on the
Signature Page hereto, or at such other address or addresses as may have
been furnished to the Company in writing.

 

7.             Changes.  This Agreement shall not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Investor.

 

8.             Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and will not be
deemed to be part of this Agreement.

 

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 

 

10

 

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.

 

11Exhibit 10.2

 

SECURITY RESEARCH
ASSOCIATES, INC.

 

May 23, 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 May 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) 18
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 price per share of the Company’s
securities paid by all of the investors in the Financing received by the
Company at closing (the “SRA Warrants”). 
The warrants will not be exercisable for a period of 180 days following
the closing.  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 which will be the same as the price
of such warrants issued to the SRA Investors in the Financing and the
underlying shares will be fully registered and issued from the Company’s
shelf.  Notwithstanding the above to the
extent that the Company places its securities with SRA’s Investors, the Company
will provide the same rights to SRA with respect to the Warrants as the rights
granted by the Company to the SRA Investors.

 

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).

 

If the Company, in
lieu of or in addition to a Financing or a Financing Commitment, enters into a
transaction, during the term of this Agreement or within 6 months of the
termination of this Agreement, pursuant to which the Company sells or licenses
to SRA Investors any of the Company’s divisions, business segments or material
assets, (“Asset Sale”) the Company will, so long as the Asset Sale occurs as a
result of SRA’s efforts, pay to SRA an Asset Sale Fee equal to two and a half
percent (2.5%) of the value attributable to the deal (the acquisition price).
The Asset Sale Fee shall be paid upon consummation of the transaction.  Upon the termination or expiration of this
Agreement, SRA and the Company shall agree to a list of SRA Investors
introduced to the Company by SRA pursuant hereto.

 

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.  In the event this Agreement is
terminated and prior to the expiration of 6 (six) months from the date of such
termination, an agreement is entered into by the Company with respect to any
transaction contemplated by this agreement with any SRA Investors, SRA will be
entitled to the Transaction Fee set forth above, including transactions
involving the sale of the company, its divisions or its material assets.  Upon the termination or expiration of this
Agreement, SRA and the Company shall agree to a list of SRA Investors
introduced to the Company by SRA pursuant hereto.

 

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 

 

2

 

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 

 

3

 

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

  	
  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: 5/23/08

  	
  Date: 5/23/08

  
					

 

4

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