Wave Systems Corp. (fka WAVXQ)

[2bStealthy]

On July 30, 2004, Wave Systems Corp. ("Wave") entered into a
Securities Purchase Agreement (the "Purchase Agreement"), pursuant to which Wave
sold and issued 3,529,412 shares of Class A Common Stock, par value $.01 per
share (the "Common Shares"), and two series of warrants (the "Warrants") to
purchase Wave's Class A Common Stock (the "Warrant Shares") to a certain
purchaser who is a party to the Purchase Agreement (the "Purchaser") for an
aggregate purchase price of $3,000,000. The Common Shares were priced at $0.85.
The Common Shares and Warrant Shares were drawn-down off of a shelf registration
statement which was filed by Wave on April 15, 2004 and declared effective by
the Securities and Exchange Commission (the "SEC") on May 10, 2004. The Purchase
Agreement is attached hereto as Exhibit 10.1.

Wave also granted the Purchaser a 90-day additional investment right
to purchase up to 3,529,412 additional Common Shares at a price of $1.00 per
share (the "Additional Investment Right"). These Common Shares are also to be
drawn-down off of the shelf registration statement. The Additional Investment
Right is attached hereto as Exhibit 10.2.

The Warrants are made up of two different series. The Series A
warrants (the "A Warrants") are exercisable for up to 3,529,412 shares of Class
A common stock at an exercise price of $1.15 per share. The A Warrants are
exercisable from January 30, 2005 until July 30, 2005. The Series B warrants
(the "B Warrants") are exercisable for up to 882,353 shares of Class A common
stock at an exercise price of $1.30 per share. The B Warrants are exercisable
from July 30, 2005 until January 30, 2006. Under the terms of the offering, in
no event shall the Purchaser become the beneficial owner of more than 9.99% of
the number of shares of Class A common stock outstanding immediately after
giving effect to such issuance. The rights of the holder of the A Warrants and
the B Warrants are more fully set forth in the forms of Warrant attached hereto
as Exhibits 10.3 and 10.4.

Corpfin Inc. (the "Placement Agent"), has entered into a placement
agency agreement with us in which they have agreed to act as placement agent in
connection with the offering. The Placement Agent is using its best efforts to
introduce us to selected institutional investors who will purchase Common
Shares. The Placement Agent has no obligation to buy any Common Shares from us.
We have agreed to pay the Placement Agent a fee equal to 4.0% of the gross
proceeds of this offering. The Placement Agency Agreement is attached hereto as
Exhibit 10.5.

On August 2, 2004, Wave issued a press release announcing the
transaction. A copy of this press release has been filed with this Current
Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

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