Document:

Exhibit 10.1

 

SUBSCRIPTION AGREEMENT

 

August 11, 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 1,368,333 shares of Class A
Common Stock (the “Total Shares”), par value $0.01 per share (the “Common
Stock”) for a purchase price of $0.60 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 342,083 shares of Common Stock at an exercise price of $0.65 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. 333-150340) filed with the United States Securities and
Exchange Commission (the “Commission”) (which, together with all
amendments or supplements thereto is referred to herein as the “Registration
Statement”) and a Prospectus Supplement containing certain supplemental
information regarding the Securities and terms of the Offering that will be
filed with the Commission (the “Prospectus Supplement”).

 

4.                                      The Company and the Investor agree that the
Investor will purchase from the Company and the Company will issue and sell to
the Investor, for the aggregate purchase price set forth below, (a) the
number of shares of 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:

 

o
(Initial Here For  Settlement through
account with SRA).

o
(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 

 

1

 

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 June 23,
2008, which is a part of the Company’s Registration Statement, and
the Prospectus Supplement.  THIS AGREEMENT SHALL NOT CONSTITUTE A BINDING
COMMITMENT ON THE PART OF THE COMPANY UNTIL (A) THE COMPANY HAS
TIMELY RECEIVED AN EXECUTED COPY OF THE COMPLETED SUBSCRIPTION AGREEMENT FROM
THE INVESTOR AND (B) THE COMPANY HAS DELIVERED TO THE INVESTOR AN EXECUTED
COUNTERPART SIGNATURE PAGE HERETO. 
THE INVESTOR ACKNOWLEDGES THAT, AT ANY TIME PRIOR TO THE DELIVERY OF ITS
EXECUTED COUNTERPART SIGNATURE PAGE, THE COMPANY MAY ELECT TO NOT
ENTER INTO THIS SUBSCRIPTION AGREEMENT FOR ANY REASON.

 

2

 

SIGNATURE
PAGE

 

	
  Number of Investor Shares:

  	
  Shares issuable upon
  exercise of Warrant

  
	
   

  	
   

  
	
  Price Per Investor Share:

  	
  $0.60

  	
  Warrant Exercise Price
  $0.65

  
	
   

  	
   

  
	
  Aggregate Purchase Price:

  	
  $

  
			

 

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

 

	
   

  	
  Dated as
  of: August 11, 2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone #:

  	
   

  
	
   

  	
  Email:

  	
   

  
	
   

  	
   

  	
   

  
	
  Agreed
  and Accepted

  	
   

  	
   

  
	
  August 11,
  2008:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WAVE
  SYSTEMS CORP.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
										

 

 

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

  	
   

  

 

 

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:

  	
   

  
													

 

 

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 August    , 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 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 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 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 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.Exhibit 10.2

 

August 11, 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 August 14,
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 behalf of the Company and will make no representation to any
third party to the contrary.

 

During the
term of this Agreement and thereafter, each of the Company and SRA agrees to keep
confidential and not disclose to any third party any confidential information
of the other party, and to use such confidential information only in connection
with the engagement hereunder; provided, however, the foregoing will not
prohibit disclosures (i) to the parties’ employees, agents and other
representatives to the extent necessary to enable the Company or SRA to perform
its responsibilities under this Agreement, (ii) to the extent required by
law, judicial or administrative process or regulatory demand, or (iii) with
respect to matters which become public other than by the actions of the
disclosing party hereunder. This section will survive the termination of this
Agreement for a period of five years.

 

Each of the
Company and SRA agrees that in connection with any Financing intended to
qualify for the exemption from the registration requirements of the Securities
Act of 1933, as amended (the “Act”), provided by Section 4(2) of the
Act, the Company and SRA shall limit offers to sell, and solicitations of
offers to buy, securities of the Company in connection with the Financing to
persons reasonably believed by it to be “qualified institutional buyers” as
such term is defined in Rule 144A under the Act or “accredited investors”
as such term is defined in Rule 501(a) of Regulation D promulgated
under the Act.

 

Each of the
Company and SRA agrees that any offers it makes in connection with the
Financing will be made only to prospective purchasers on an individual basis
and that it will not engage in any form of general solicitation or general
advertising (within the meaning of Rule 502 under the Act) in connection
with the Financing. Each of the Company and SRA agrees to conduct the Financing
in a manner intended to comply with the registration or qualification
requirements, or available exemptions there from, under applicable state “blue
sky” laws and applicable securities laws of other jurisdictions.

 

The Company
may decline to consummate the Financing with any prospective purchaser in the
Company’s sole discretion.

 

The Company agrees to:

 

(a)                                  Indemnify
and hold SRA harmless against any and all losses, claims, damages or
liabilities to which SRA may become subject arising out of or in connection
with any of the services rendered by SRA pursuant to this Agreement, unless
such losses, claims, damages or liabilities resulting 

 

 

from the gross negligence or willful
misconduct of SRA or a breach of this agreement by SRA; and

 

(b)                                 Reimburse
SRA periodically for reasonable legal or other expenses incurred by SRA in
connection with investigating, preparing to defend or defending, or providing
evidence in or preparing to serve or serving as a witness with respect to, any
lawsuits, investigations, claims or other proceedings arising in any manner out
of or in connection with the rendering of services by SRA pursuant to this
Agreement (including, without limitation, in connection with the enforcement of
this Agreement and the indemnification obligations set forth herein); it being
understood however that the Company shall have no obligation to reimburse SRA
for any such expenses and SRA shall immediately repay any such reimbursements
by the Company in the event any losses, claims, damages or liabilities are
finally judicially determined to have resulted from the gross negligence or
willful misconduct of SRA or a breach of this agreement by SRA.

 

The Company agrees that the indemnification and reimbursement
commitments set forth in this document shall apply whether or not SRA is a
formal party to any lawsuits, arbitrations, claims or other proceedings and
that such commitments shall extend upon the terms set forth in this paragraph
to any controlling person, affiliate, director, officer, employee or agent of
SRA (each, with SRA, an “Indemnified Person”). In the event an Indemnified
Person is made a formal party to a lawsuit, claim or other proceeding arising
out of or in connection with any of the services rendered by SRA pursuant to
this Agreement, and the Company takes over the defense of such action for an
Indemnified Person, the Company further agrees that it will not, without such
Indemnified Person’s prior written consent, which consent shall not be
unreasonably withheld, enter into any settlement of a lawsuit, claim or other
proceeding arising out of or in connection with the transaction unless such
settlement includes an express and unconditional release from the party
bringing the lawsuit, claim or other proceeding of all Indemnified Persons. With
respect to the immediately preceding sentence, in the event an Indemnified
Person reasonably withholds their consent to a settlement, the Indemnified
Person shall be responsible for all subsequent costs and expenses arising out
of the defense of the Indemnified Person.

 

The Company further agrees that the Indemnified Persons are entitled to
retain separate counsel of their selection in connection with any of the
matters in respect of which indemnification, reimbursement or contribution may
be sought under this Agreement, provided that, in connection with any one
action or proceeding, the Company shall not be responsible for the fees and
expenses of more than one separate law firm or individual attorney in any one
jurisdiction for all Indemnified Persons.

 

Any dispute arising out of this Agreement shall be resolved in an arbitration
conducted pursuant to the rules of the National Association of Securities
Dealers, Inc. in New York, NY.

 

 

Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed copy of this Agreement,
which shall become a binding agreement upon our receipt. We are delighted to
accept this engagement and look forward to working with you on this assignment.

 

Very truly yours,

Brian G. Swift, Chairman and CEO

 

Agreement Confirmed by:

 

	
  Security Research
  Associates, Inc.

  	
   

  	
  Wave Systems Corp.

  
	
  80 E. Sir Francis Drake Boulevard,
  Suite 3F

  	
   

  	
  480 Pleasant Street

  
	
  Larkspur, CA 94939

  	
   

  	
  Lee, MA 01238

  
	
   

  	
   

  
	
  By:

  	
  /s/David N. Olson

  	
   

  	
  By:

  	
  /s/ Gerard T. Feeney

  
	
  David N. Olson

  	
   

  	
  Mr. Gerard T. Feeney

  
	
  Managing Director

  	
   

  	
  Chief Financial Officer

  
	
  Date: August 11, 2008

  	
   

  	
  Date: August 11, 2008

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