SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

WAVE SYSTEMS CORP.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than Registrant)

Payment of Filing Fee (check the appropriate box):

[X] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

1) Title of each class of securities to which transaction applies: N/A

2) Aggregate Number of securities to which transaction applies: N/A

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A

4) Proposed maximum aggregate value of transaction: N/A

5) Total fee paid: N/A

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: N/A

2) Form, Schedule or Registration Statement No.: N/A

3) Filing Party: N/A

4) Date Filed: N/A

WAVE SYSTEMS CORP.
480 PLEASANT STREET
LEE, MASSACHUSETTS 01238

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 26, 2000

TO THE STOCKHOLDERS OF WAVE SYSTEMS CORP.:

Notice is hereby given that The 2000 Annual Meeting of Stockholders of Wave
Systems Corp. (the "Company") will be held at 4 p.m. on Monday, June 26, 2000 at
the Grand Hyatt, Park Avenue and Grand Central Station, New York, New York, for
the following purposes:

1. TO RE-ELECT PETER SPRAGUE, JOHN E. BAGALAY, JR., PHILIPPE BERTIN, GEORGE
GILDER, JOHN E. MCCONNAUGHY, JR., STEVEN SPRAGUE AND NOLAN BUSHNELL AS
DIRECTORS OF THE COMPANY TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED; AND

2. TO AMEND THE COMPANY'S 1994 EMPLOYEE STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES OF CLASS A COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER
BY 5,000,000 SHARES.

3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.

The Board of Directors has fixed the close of business on April 26, 2000 as
the record date for the determination of the stockholders entitled to notice of,
and to vote at, the 2000 Annual Meeting of Stockholders and at any adjournments
or postponements thereof.

By Order of the Board of Directors,

/s/ Gerard T. Feeney

Gerard T. Feeney
SECRETARY

Lee, Massachusetts
May 22, 2000

YOUR VOTE IS IMPORTANT

IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR IF YOU DO PLAN TO ATTEND
BUT WISH TO VOTE BY PROXY, PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

WAVE SYSTEMS CORP.
480 PLEASANT STREET
LEE, MASSACHUSETTS 01238

------------------------

PROXY STATEMENT

------------------------

ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 2000

GENERAL

This Proxy Statement is being furnished to the holders of the common stock,
$.01 par value per share ("Common Stock") of Wave Systems Corp., a Delaware
corporation (the "Company"), in connection with the solicitation by the Board of
Directors of proxies for use at the Annual Meeting of Stockholders to be held on
Monday, June 26, 2000, (the "Annual Meeting") commencing at 4 p.m., at the Grand
Hyatt, Park Avenue and Grand Central Station, New York, New York, and at any
adjournments or postponements thereof. The matters to be considered and acted
upon at the meeting are described below in this Proxy Statement.

The principal executive offices of the Company are located at 480 Pleasant
Street, Lee, Massachusetts 01238. The approximate mailing date of this Proxy
Statement and the accompanying proxy is May 26, 2000.

VOTING RIGHTS AND VOTES REQUIRED

Only stockholders of record at the close of business on April 26, 2000 will
be entitled to notice of, and to vote at, the Annual Meeting. As of such record
date, the Company had outstanding 45,222,571 shares of Class A Common Stock and
1,480,674 shares of Class B Common Stock. Each stockholder is entitled to one
vote for each share of common stock held on the matters to be considered at the
Annual Meeting. The holders of a majority of the outstanding shares will
constitute a quorum for the transaction of business at the meeting. Shares of
common stock present in person, or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the meeting.

The affirmative vote of the holders of a plurality of the shares of common
stock present or represented at the meeting is required for the election of
directors. Abstentions will be treated as shares that are present and entitled
to vote for purposes of determining the number of shares present and entitled to
vote with respect to any particular matter, but will not be counted as a vote in
favor of such matter. Accordingly, an abstention from voting on a matter will
have the same legal effect as a vote against the matter. If a broker or nominee
holding stock in "street name" indicates on the proxy that it does not have
discretionary authority to vote as to a particular matter, those shares will not
be considered as present and entitled to vote with respect to such matter.

The accompanying proxy may be revoked at any time before it is exercised by
giving a later proxy, notifying the Secretary of the Company in writing, or
voting in person at the meeting.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the beneficial
ownership of the Company's Class A and Class B Common Stock as of April 26, 2000
(except as otherwise noted) by (i) each stockholder who is known by the Company
to own beneficially more than five percent of the outstanding Class A or
Class B Common Stock, (ii) each director of the Company, (iii) each of the
executive officers of the Company named in the Summary Compensation Table above,
and (iv) all directors and executive officers of the Company as a group. Holders
of Class A Common Stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders of the Company. Holders of Class B
Common Stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, except that holders of Class B Common Stock will have
five votes per share in cases where one or more directors are nominated for
election by persons other than the Company's Board of Directors and where there
is a vote on any merger, consolidation or other similar transaction which is not
recommended by the Company's Board of Directors. In addition, holders of
Class B Common Stock will have five votes per share on all matters submitted to
a vote of the stockholders in the event that any person or group of persons
acquires beneficial ownership of 20% or more of the outstanding voting
securities of the Company. Shares of Class B Common Stock are convertible into
shares of Class A Common Stock on a one-for-one basis at the option of the
holder.

NUMBER OF NUMBER OF PERCENT
SHARES SHARES OF ALL
OF CLASS A PERCENT OF CLASS B PERCENT OUTSTANDING
BENEFICIAL COMMON OF COMMON OF COMMON
OWNER(1) STOCK OWNED(2) CLASS STOCK OWNED CLASS STOCK(3)
- ---------- -------------- -------- ----------- -------- -----------

Peter J. Sprague(4)..................... 662,333 1.5 722,899 48.8 3.0
Steven Sprague(5)....................... 643,666 1.4 185,659 12.5 1.8
John E. Bagalay, Jr.(6)................. 96,000 * 0 * *
Philippe Bertin(7)...................... 76,000 * 0 * *
George Gilder(8)........................ 176,000 * 0 * *
John E. McConnaughy, Jr.(9)............. 23,115 * 275,000 18.6 *
Nolan Bushnell(10)...................... 22,000 0
Gerard T. Feeney(11).................... 333,334 * 0 * *
All executive officers and directors as
a group (8 persons)(12)............... 2,032,448 4.5 1,183,558 79.9 6.9
Aladdin Knowledge Sys.(13).............. 1,593,922 3.5 0 * 3.4

- ------------------------

* Less than one percent.

(1) Each individual or entity has sole voting and investment power, except as
otherwise indicated.

(2) Does not include shares of Class A Common Stock issuable upon the conversion
of Class B Common Stock.

(3) In circumstances where the Class B Common Stock has five votes per share,
the percentages of total voting power would be as follows: Peter J. Sprague,
8.1%; Steven Sprague, 3.0%; John E. Bagalay, Jr., less than 1%; Philippe
Bertin, less than 1%; George Gilder, less than 1%; John E. McConnaughy, Jr.,
2.7%; Nolan Bushnell, less than 1%; Gerard T. Feeney, less than 1%; Aladdin
Knowledge Systems, 3.0%; and all Executive Officers and Directors as a
group, 15.1%.

(4) Includes 662,333 shares, of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days. Also includes
320,000 shares of Class B Common Stock held in trust for the benefit of
Mr. Sprague's adult children, and for which Mr. Sprague is a trustee.

(5) Includes 556,666 shares of Class A Common Stock which are subject to options
presently exercisable or exercisable within 60 days. Also includes 37,102
shares of Class B Common Stock held in trust for the benefit of
Mr. Sprague's family, and for which Mr. Sprague is a trustee.

(6) Includes 92,000 shares of Class A Common Stock which are subject to options
presently exercisable.

(7) Includes 72,000 shares of Class A Common Stock which are subject to options
presently exercisable.

(8) Includes 172,000 shares of Class A Common Stock which are subject to options
presently exercisable.

(9) Includes 10,000 shares of Class A Common Stock which are subject to options
presently exercisable.

(10) Includes 22,000 shares of Class A Common Stock which are subject to options
presently exercisable.

(11) Includes 233,334 shares of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days.

(12) Includes 1,820,333 shares of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days.

(13) Includes 1,483,722 shares of Class A Common Stock which are subject to
warrants presently exercisable or exercisable within 60 days.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

At the Annual Meeting, seven directors are to be elected, each to hold
office until the next annual meeting of stockholders and until his respective
successor has been duly elected and qualified. If no direction is given to the
contrary, all proxies received by the Board of Directors will be voted "FOR" the
election as directors of each of the following nominees. In the event that any
nominee declines or is unable to serve, the proxy solicited herewith may be
voted for the election of another person in his stead at the discretion of the
proxies. The Board of Directors has no reason to believe that any of the
nominees will not be available to serve. Set forth below is the name and age of
each nominee, their position with the Company, if any, the year in which each
first became a director, the principal occupation and employment of each over
the last five years and other directorships, if any. Each nominee is currently a
director of the Company.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES.

MANAGEMENT

DIRECTORS

BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST 5 YEARS; POSITIONS HELD WITH WAVE DIRECTOR
NAME AGE SYSTEMS; OTHER DIRECTORSHIPS SINCE
- ---- -------- -------------------------------------------------------- --------

Peter J. Sprague(1)(4).... 61 Chairman of the Board since 1988; Chief Executive 1988
Officer of the Company from July 1991 to March 2000;
Chairman of National Semiconductor Corporation from 1965
until May 1995; Director of EnLighten Software, Inc. and
Imagek, Inc.; Trustee of the Strang Clinic; Member of
Academy of Distinguished Entrepreneurs, Babson College.

John E. Bagalay, Jr.,..... 66 Senior Advisor to the Chancellor of Boston University 1993
Ph.D.(1)(2)(4) since January 1998; Chief Operating Officer and Chief
Financial Officer of Eurus Technologies, Inc. since
January 1999; President and CEO of Cytogen Corporation
from January 1998 and Chief Financial Officer from
October 1997 to September 1998; Managing Director,
Community Technology Fund, venture capital affiliate of
Boston University from September 1989 to December 1997;
former General Counsel of Lower Colorado River
Authority, Texas Commerce Bancshares, Inc. and Houston
First Financial Group; Director of Cytogen Corporation,
AES, Inc., and several privately held companies.

Philippe Bertin(3)........ 51 Manager of Financiere Wagram Poncelet since December 1993
1991; Manager of Midial S.A. from 1984 until 1991;
Manager of FINOVELEC since October 1997.

George Gilder(4).......... 60 Chairman of the Executive Committee since 1996; Senior 1993
Fellow at the Discovery Institute in Seattle,
Washington; author of nine books, including Life After
Television, Microcosm, The Spirit of Enterprise and
Wealth and Poverty; contributing editor to Forbes
Magazine; Director and President of Gilder Technology
Group, Inc. (publisher of monthly technology reports);
former chairman of the Lehrman Institute Economic
Roundtable; former Program Director for the Manhattan
Institute; recipient of White House award for
Entrepreneurial Excellence from President Reagan.

John E. McConnaughy, Jr... 71 Chairman and Chief Executive Officer of JEMC 1988
(1)(2)(3)(4) Corporation; Chairman and Chief Executive Officer of
Peabody International Corporation from 1969 through
1985; Chairman and Chief Executive Officer of GEO
International Corporation (nondestructive testing,
screen printing and oil field services company spun off
from Peabody International Corporation) from February
1981 to October 1992; Director of Riddell Sports Inc.,
Levcor International, Inc., Transact International,
Inc., De-Vlieg Bullard, Inc. and Mego Financial Corp.
Mr. McConnaughy is also a member of the Board of
Trustees of the Strang Clinic and the Chairman of the
Board of the Harlem School of the Arts.

Steven Sprague............ 35 Chief Executive Officer of the Company since March 2000; 1997
President and Chief Operating Officer since May 1996;
President of Wave Interactive Network from June 1995 to
December 30, 1996; Vice President of Operations from
April 1994 to June 1995; Wave employee in the areas of
operations and strategic planning from November 1992 to
April 1994; consultant to the Company from March 1992 to
November 1992; President of Tech Support, Incorporated
(hardware technical support information on CD-ROM) from
June 1992 to November 1992; sole proprietor of SKS
Environmental Sales (manufacturers' representative for
water treatment companies) from June 1991 to November
1992.

Nolan Bushnell............ 57 Chairman and Chief Executive Officer of uWink.com, Inc. 1999
since 1996; Chairman of OCTuS, Inc. from 1991 to 1995;
consultant to IBM, Commodore International and Bally
Manufacturing.

- ------------------------

(1) Member of Nominating Committee.

(2) Member of Compensation Committee.

(3) Member of Audit Committee.

(4) Member of Executive Committee.

BOARD AND COMMITTEE MEETINGS; DIRECTORS' COMPENSATION

The Board of Directors met four times during 1999. No director attended
fewer than 75 percent of the aggregate number of meetings of the Board and the
Board Committees on which such director served. The Board Committees include an
Audit Committee, a Compensation Committee, a Nominating Committee and an
Executive Committee.

The members of the Audit Committee are Messrs. Bertin and McConnaughy. The
Audit Committee reviews the services provided by the Company's independent
auditors, consults with the independent auditors on audits and proposed audits
of the Company, and reviews the need for internal auditing procedures and the
adequacy of the Company's internal control systems. In 1999, the Audit Committee
held one meeting.

The members of the Compensation Committee are Messrs. Bagalay and
McConnaughy. The Compensation Committee administers the Company's stock option
plans, and reviews and recommends compensation levels of the Company's executive
officers. In 1999, the Compensation Committee held two meetings.

The members of the Nominating Committee are Messrs. Bagalay, McConnaughy and
Peter J. Sprague. The Nominating Committee establishes procedures for
identifying potential candidates for appointment or election as directors,
reviews and makes recommendations regarding the criteria for Board membership,
and proposes nominees for election at the annual meeting and candidates to fill
Board vacancies. The Nominating Committee will consider recommendations for
nominees from any stockholder who is entitled to vote for the election of
directors. Stockholders should send recommendations of

candidates for nomination for the 2001 slate of directors, in writing, no later
than December 31, 2000 to the Company's Secretary, 480 Pleasant Street, Lee,
Massachusetts 01238. Recommendations must be accompanied by the consent of the
individual being recommended to be nominated, to be elected and to serve. The
submission also should include a statement of the candidate's business
experience and other business affiliations. In 1999, the Nominating Committee
held one meeting.

The members of the Executive Committee are Messrs. Bagalay, Gilder,
McConnaughy and Peter J. Sprague. The Executive Committee assists the Chairman
of the Company in the absence of a meeting of all members of the Board of
Directors. The Executive Committee brings material matters to the attention of
the Board of Directors and prepares the deliberation process of the Board of
Directors, thus accelerating vital decisions for the Company. However, the Board
of Directors did not delegate its full power to the Executive Committee and
asked that the Executive Committee include all members of the Board of Directors
in major decisions affecting the Company. In 1999, the Executive Committee held
no meetings.

Directors received no cash compensation for serving on the Board of
Directors in 1999. Under the Company's Non-Employee Directors Stock Option Plan,
each director who is not an employee of the Company receives an annual grant of
options to purchase 12,000 shares of Class A Common Stock at fair market value.
The options are granted upon re-election after the annual meeting of the
stockholders and vest the day following the grant. Options terminate upon the
earliest to occur of (i) subject to (ii) below, three months after the optionee
ceases to be a director of the Company, (ii) one year after the death or
disability of the optionee, and (iii) ten years after the date of grant. If
there is a change of control of the Company, all outstanding stock options will
become immediately exercisable.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information with respect to the compensation
paid or awarded by the Company during 1997, 1998 and 1999 to the Chief Executive
Officer and the other executive officers whose cash compensation exceeded
$100,000 (collectively, the "Named Executive Officers").

LONG-TERM
COMPENSATION
AWARDS
----------------
ANNUAL COMPENSATION NUMBER OF SHARES
NAME AND PRINCIPAL -------------------- UNDERLYING
POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- ------------------ -------- --------- -------- ----------------

Peter J. Sprague(1)............................... 1999 $185,000 $150,000 100,000
CHAIRMAN AND CHIEF 1998 $182,917 $150,000 895,505
EXECUTIVE OFFICER 1997 $160,000 $100,000 0

Steven Sprague(2)................................. 1999 $180,000 $150,000 100,000
PRESIDENT AND 1998 $177,500 $150,000 954,505
CHIEF OPERATING OFFICER 1997 $150,000 $117,500 0

Gerard T. Feeney(3)............................... 1999 $160,000 $120,000 100,000
SENIOR VICE PRESIDENT, CHIEF 1998 $ 90,359 $ 65,000 450,000
FINANCIAL OFFICER AND
SECRETARY

- ------------------------

(1) Mr. Peter Sprague was awarded a bonus of $150,000 for 1999 which was paid in
2000 and was fully applied to his outstanding loans with Wave. He also
received a bonus for 150,000 in 1998, $75,000 was received in cash and
$75,000 was applied to reduce his loans from the Company (see Item 13).

(2) Mr. Steven Sprague was elected President and Chief Operating Officer on
May 23, 1996 and was not previously an executive officer during 1996. Prior
to that, Mr. Steven Sprague was Vice President of Operations of the Company
from April 1994 to June 1995 and was an employee of the Company in the areas
of operations and strategic planning from November 1992 to April 1994.

(3) Mr. Gerard T. Feeney was hired as Senior Vice President, Finance and
Administration and Chief Financial Officer on June 8, 1998 and was elected
Secretary on February 25, 1999.

OPTION GRANTS TABLE

The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1999 by the Company to the Named
Executive Officers.

POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ---- ----------- ----------- --------- ---------- --------- ---------

Peter J. Sprague......................... 100,000 5.2% $4.00 1/15/09 251,560 637,500
Steven Sprague........................... 100,000 5.2 4.00 1/15/09 251,560 637,500
Gerard T. Feeney......................... 100,000 5.2 4.00 1/15/09 251,560 637,500

- ------------------------

(1) The potential realizable value of the options reported above was calculated
by assuming 5% and 10% compounded annual rates of appreciation of the common
stock from the date of grant of the options until the expiration of the
options, based upon the market price on the date of grant. These assumed
annual rates of appreciation were used in compliance with the rules of the
Securities and Exchange Commission and are not intended to forecast future
price appreciation of the common stock.

FISCAL YEAR END OPTION VALUE TABLE

The following table sets forth information regarding the aggregate number
and value of options held by the Named Executive Officers as of December 31,
1999, and the aggregate number and value of options exercised by the Named
Executive Officers during 1999.

NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1999(#) AT DECEMBER 31, 1999($)(1)
ACQUIRED VALUE --------------------------- ----------------------------
NAME EXERCISE RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ------------ -------------

Peter J. Sprague................... 0 0 330,499 697,001 $3,094,208 $6,322,763
Steven Sprague..................... 35,000 560,000 165,166 856,334 1,657,673 7,804,265
Gerard T. Feeney................... 0 0 150,000 400,000 1,265,625 3,325,000

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(1) The last reported bid price for the Company's Class A Common Stock on
December 31, 1999 was $11.9375 per share. Value is calculated on the basis
of the difference between the respective option exercise prices and
$11.9375, multiplied by the number of shares of common stock underlying the
respective options.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NOTE RECEIVABLE FROM DIRECTOR/OFFICER

On November 16, 1992, the Company made a personal loan to Mr. Peter J.
Sprague, Chairman and Chief Executive Officer of the Company, as evidenced by a
note for $150,000, which sum was due and payable to the Company on January 16,
1993 and which bore interest at the rate of ten percent (10%) per annum. On the
due date, the note was canceled and the total amount owed was "rolled-over" into
a subsequent note, dated May 12, 1993 for $150,000, plus accrued interest. The
note is due on demand by the Company and accrues interest at the rate of 10% per
annum. On April 22, 1993, the Company made an additional loan to Mr. Peter
Sprague for $23,175 as evidenced by a subsequent note, which is due on demand by
the Company and which bears interest at a rate of 10% per annum. All of these
loans were made to Mr. Sprague for personal reasons. Of Mr. Sprague's $150,000
bonus for 1998, $75,000 was applied against his indebtedness to the Company. As
of December 31, 1999, Mr. Sprague's aggregate indebtedness (including accrued
interest) to the Company under the notes totaled $154,160. During March 2000 the
entire note was paid. No demand has been made as of the date hereof. The notes
were secured by a pledge of 67,000 shares of Class B Common Stock.

WAVEXPRESS

In April 1999, we joined with Sarnoff Corporation to announce the formation
of a new joint venture, WaveXpress. On October 15, 1999 Wave and Sarnoff signed
a Joint Venture Agreement which formally established WaveXpress. Under this
agreement Sarnoff and affiliates received a 40% equity stake in WaveXpress. Wave
and its affiliates that purchased founders stock in April 1999 own the remaining
60% of the outstanding capital stock. The affiliates of Wave include Peter
Sprague and Steven Sprague, the Chief Executive Officer and President of Wave,
respectively, certain members of the Board of Directors of Wave and certain
employees of Wave. This affiliate group purchased for a nominal amount, founders
stock representing, in the aggregate, 7% of the outstanding capital stock of
WaveXpress. Wave is currently funding WaveXpress through a convertible note.
Through December 31, 1999, Wave has loaned WaveXpress approximately
$3.2 million. Neither Sarnoff nor any of the other minority shareholders are
obligated to provide any funding to the venture.

AMENDED AND RESTATED LICENSE AGREEMENT AND ASSIGNMENT

Pursuant to an Amended and Restated License Agreement, dated February 14,
1994, and related Patent Assignment and Security Agreement, Mr. Peter J. Sprague
assigned his interest in a patent for the metering and usage of serial data
information to the Company in exchange for a non-terminable royalty interest.
The Company has agreed to pay royalties to Mr. Sprague in an amount equal to 2%
of the gross revenues (less actual amounts paid to information, database and
content providers, hardware manufacturers and suppliers, search and retrieval
software suppliers, consolidators of information and network providers) derived
from the Company's technology based on the patent. The royalty payments are
allocated 75% to Mr. Sprague and 25% to one of our former officers, and are
secured by a security interest in the patent.

LICENSE AND CROSS-LICENSE AGREEMENT

On May 1, 1992, the Company entered into a Joint Technology Development
Agreement and License and Cross-License Agreement with The Titan Corporation
whereby Titan granted to the Company license rights to the use of certain
patents which are co-owned by Titan. Dr. Gene W. Ray, a former director of the
Company, is a director, President and Chief Executive Officer of Titan. The
Company granted to Titan the exclusive right to make for, sell in, and lease in
a "Retained Market," as defined in the agreement, the subject matter described
in any Company patent. The Retained Market is defined generally as the market
for "Government Information," as defined in the agreement, used solely by a
government entity, and the

market for products used to access such information. On February 28, 1997 the
Company and Titan executed an addendum to the License and Cross-License
Agreement whereby the Company received a sole license to the licensed patent to
develop and distribute products to the in-home consumer microcomputer market
segment.

Under this addendum to the License and Cross-License Agreement, Titan waived any
and all defaults by the Company under the License and Cross-License Agreement
occurring prior to February 28, 1997.

COMPENSATION TO STEVEN SPRAGUE

Steven Sprague received aggregate compensation of $330,000, $327,500 and
$267,500 for services rendered to the Company in 1999, 1998 and 1997,
respectively. Steven Sprague is the son of Mr. Peter J. Sprague, the Chairman
and Chief Executive Officer of the Company.

COMPENSATION TO MICHAEL SPRAGUE

Michael Sprague received aggregate compensation of $111,666, $110,000 and
$112,500 for services rendered to the Company in 1999, 1998 and 1997,
respectively. Michael Sprague is the son of Mr. Peter J. Sprague, the Chairman
and Chief Executive Officer of the Company. During 1999 Michael Sprague became
the Vice President of Services Development at the Company's subsidiary
WaveXpress.

REPORT OF THE COMPENSATION COMMITTEE

GENERAL

The Compensation Committee of the Board of Directors (the "Committee") is
comprised of non-employee directors. The current members of the Committee are
Messrs. John E. Bagalay, Jr. and John E. McConnaughy, Jr. The Committee reviews
and recommends to the Board of Directors compensation levels for the Company's
executive officers, and administers the Company's stock option plans, including
the awarding of grants thereunder.

COMPENSATION PHILOSOPHY

Executive compensation is heavily tied to corporate performance through the
granting of stock options. As a development stage company, the Company has
sought to contain costs with low cash salaries and bonuses.

The Company has not established a policy with regard to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") since the Company has
not and does not currently anticipate paying cash compensation in excess of
$1 million per annum to any employee. The Company intends to administer its
stock option plans in accordance with Section 162(m) of the Code.

BASE SALARIES AND BONUSES FOR 1999

Base salaries for 1999 remained substantially lower than levels in the
competitive marketplace for executives with comparable experience, consistent
with the Company's position as a development stage company. As part of the
Company's compensation policy of meeting defined goals and objectives, the
Company awarded the following bonuses to the Named Executive Officers: $150,000
to Mr. Peter J. Sprague, Chairman and Chief Executive Officer; $150,000 to
Mr. Steven Sprague, President and Chief Operating Officer; and $120,000 to
Mr. Gerard T. Feeney, Senior Vice President, Chief Financial Officer and
Secretary.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Compensation of the Chief Executive Officer was determined in accordance
with the criteria set forth above. The Committee believes that CEO compensation
was appropriately based upon the Company's financial position and performance.

Respectfully submitted,

Compensation Committee

John E. Bagalay, Jr.

John E. McConnaughy, Jr.

PERFORMANCE GRAPH

The following line graph compares the Company's cumulative total return to
stockholders with the cumulative total return of the Nasdaq Market Value Index
and the Computer Related Services SIC Code Index from December 31, 1994 through
December 31, 1999. These comparisons assume the investment of $100 on
December 31, 1994 and the reinvestment of dividends. The stock performance on
the graph is not necessarily indicative of future stock price performance.

WAVE SYSTEMS CORP.
COMPARISON OF CUMULATIVE TOTAL RETURN TO STOCKHOLDERS
DECEMBER 31, 1994 THROUGH DECEMBER 31, 1999

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

WAVE SYSTEMS PEER GROUP (SIC CODE 7379) NASDAQ MARKET

12/31/94 100 100 100
12/31/95 91.67 117.92 128.71
12/31/96 72.92 214.3 161.18
12/31/97 37.5 226.93 197.16
12/31/98 126.03 47.2 278.08
12/31/99 397.93 977.18 490.46

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons owning more than ten percent of a registered class

of the Company's equity securities, to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of equity securities of
the Company. Such persons are also required to furnish the Company with copies
of all such forms.

Based solely upon a review of the copies of such forms furnished to the
Company and, in certain cases, written representations that no Form 5 filings
were required, the Company believes that, with respect to the 1999 fiscal year,
all required Section 16(a) filings were made.

PROPOSAL NO. 2

AMENDMENT TO THE 1994 EMPLOYEE STOCK OPTION PLAN

The Board of Directors adopted on March 23, 2000, subject to approval by the
stockholders, an amendment (the "2000 Amendment") to the Company's 1994 Employee
Stock Option Plan (the "1994 Employee Plan"). The 2000 Amendment increases by a
total of 5,000,000 the number of shares of the Company's Class A Common Stock
reserved for issuance under the 1994 Employees Plan. The Company has in the past
used, and intends in the future to use, stock options as an incentive device to
motivate and compensate its salaried officers and other key employees, and
believes that equity incentives represented by stock options enhance the
Company's ability to attract and retain needed personnel. As of April 26, 2000,
options to purchase an aggregate of 1,720,566 shares of Class A Common Stock had
been exercised under the 1994 Employee Plan, and options to purchase 6,206,462
shares of Class A Common Stock were outstanding under the 1994 Employee Plan.
Accordingly, only 72,972 shares remained available for future grants under the
1994 Employee Plan as of such date.

Under the terms of the 1994 Employee Plan, as currently in effect, the
Company is authorized to grant stock options that qualify as incentive stock
options ("ISOs") under Section 422 of the Code and non-qualified stock options
("NQSOs") to salaried officers and other key employees of the Company and its
subsidiaries who are in a position to affect materially the profitability and
growth of the Company and its subsidiaries, for up to an aggregate of 8,000,000
shares of Class A Common Stock. The following summary of certain features of the
1994 Employee Plan is qualified in its entirety by reference to the full text of
the 1994 Employee Plan, a copy of which will be furnished to any stockholder,
upon written request of such stockholder directed to Mr. Gerard T. Feeney,
Secretary, 480 Pleasant Street, Lee, Massachusetts 01238.

SUMMARY OF THE 1994 EMPLOYEE PLAN AND THE 2000 AMENDMENT

GENERAL

The 1994 Employee Plan, as amended in 1998 and currently in effect, permits
the Company to grant ISOs and NQSOs to salaried officers and other key
employees. The 1994 Employee Plan terminates on January 1, 2004 and no options
may be granted after the termination date. The 1994 Employee Plan covers a
maximum of 8,000,000 shares of Class A Common Stock, which will be increased to
a total of 13,000,000 shares if the 2000 Amendment is approved (subject to share
adjustments as described below), which may be either authorized and unissued
shares of Class A Common Stock or shares held in the Company's treasury. When an
option lapses, expires, terminates or is forfeited, the related shares of
Class A Common Stock may be available for distribution in connection with future
options. Adjustments may be made in the number of shares reserved under the 1994
Employee Plan, in the option price and in the number of shares subject to stock
options, in the event of a merger, reorganization, consolidation,
recapitalization or stock dividend, and in the event of certain other changes
described in the 1994 Employee Plan or any other changes in the Company's
corporate structure that affect the Class A Common Stock or has an effect
similar to any of the foregoing. No employee may be granted options covering, in
the aggregate, more than 500,000 shares of Class A Common Stock in any fiscal
year of the Company (subject to adjustment as provided above).

Because grants under the 1994 Employee Plan are discretionary, the Company
cannot now determine the number of options to be received by any particular
current executive officer, by all current executive officers as a group or by
non-executive officer employees or directors as a group. The number of such
options and awards shall be determined by the Compensation Committee, pursuant
to the terms of the 1994 Employee Plan. It is currently estimated that there are
170 employees eligible to participate in the 1994 Employee Plan. For information
concerning the ownership of options by the Named Executive Officers, see
"Executive Compensation" above.

ADMINISTRATION

The 1994 Employee Plan is administered by the Compensation Committee. The
Compensation Committee is comprised of directors who are non-employee directors
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee has the sole and complete discretion, subject to the
terms of the 1994 Employee Plan, to (i) select the individuals from among the
eligible employees of the Company and its subsidiaries to whom options may be
granted, (ii) determine the type of options to be granted and the terms and
conditions of any options granted, and (iii) determine the number of shares of
common stock subject to each option granted. In addition, the Compensation
Committee is authorized to interpret the 1994 Employee Plan, to make and rescind
rules and regulations related thereto, and to make all determinations necessary
or advisable for the administration of the 1994 Employee Plan.

STOCK OPTIONS

Stock options granted under the 1994 Employee Plan may be either ISOs or
NQSOs. The aggregate fair market value (determined as of the time of the grant
of an ISO) of the Class A Common Stock with respect to which ISOs are
exercisable for the first time by a single optionee during any calendar year
under the Plan and any other stock option plan of the Company may not exceed
$100,000.

The exercise price for stock options shall be determined by the Compensation
Committee and shall be set forth in an option agreement entered into with the
optionee, provided, however, that the exercise price for an option shall not be
less than the fair market value of a share of Class A Common Stock on the date
of grant (110% in the case of an ISO granted to a 10% or more stockholder). On
December 31, 1999, the last reported bid price for the Company's Class A Common
Stock, was $11.9375 per share.

The Compensation Committee is to specify the time or times at which such
options will be exercisable, except that the termination date for any stock
option shall not exceed 10 years from the date of grant (five years in the case
of an ISO granted to a 10% or more stockholder). Options may be exercised within
three months following the retirement of an optionee and within twelve months
following the death or disability of an optionee; provided, that no option may
be exercised following the period of exercisability set forth in the agreement
related thereto.

Stock options may be exercised by an optionee in whole or in part by giving
notice to the Company and the exercise price therefor may be paid by delivering
cash or shares of unrestricted common stock having a fair market value equal to
the cash exercise price of the options being exercised. Optionees may also
utilize a cashless exercise feature which will enable them to exercise their
options without a concurrent payment of the option price, provided that the
purchased option shares are immediately sold by a designated broker and the
option price is paid directly to the Company out of the sale proceeds. Options
granted under the 1994 Employee Plan may also provide for the option holder to
receive an additional option (the "Reload Option") to purchase the number of
shares tendered by an optionee in exercising a stock option. The exercise price
of the Reload Option shall equal the fair market value of the Class A Common
Stock on the date of the grant of the Reload Option.

Stock options are nontransferable other than by will or by the laws of
descent and distribution, and stock options are exercisable during the
optionee's lifetime only by the optionee.

CHANGE OF CONTROL

In the event of a "Change of Control," as defined in the 1994 Employee Plan,
all options outstanding shall be immediately and fully exercisable and shall
become fully vested.

AMENDMENTS

The Board of Directors may terminate, suspend or amend the 1994 Employee
Plan, provided that such amendment, suspension, or termination may not affect
the validity of the then outstanding options, and provided further that the
Board may not, without the approval of stockholders (i) increase the maximum
number of shares which may be issued pursuant to the provisions of the 1994
Employee Plan, (ii) change the class of individuals eligible to receive options
under the 1994 Employee Plan, (iii) materially increase the benefits accruing to
participants under the 1994 Employee Plan, or (iv) extend the term of the 1994
Employee Plan.

WITHHOLDING TAXES

The 1994 Employee Plan provides that the Company may deduct from any
distribution to an employee an amount equal to all federal, state and local
income taxes or other amounts as may be required by law to be withheld.

FEDERAL INCOME TAX CONSEQUENCES

The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations. This description
is not intended to address specific tax consequences applicable to individual
participants.

INCENTIVE STOCK OPTIONS

No regular income tax consequences result from the grant of an ISO or the
exercise of an ISO by the employee, provided the employee continues to hold the
stock acquired on the exercise of an ISO for the requisite holding periods
described below. The employee will be taxed only upon the sale or disposition of
the stock acquired under an ISO and the gain recognized at that time will be
long-term capital gain. The holding period requirements necessary for ISO
treatment are as follows: (i) such shares may not be disposed of within two
years from the date the ISO is granted, and (ii) such shares must be held for at
least one year from the date the shares are transferred to the employee upon the
exercise of the ISO. In addition, to receive ISO treatment, the option holder
generally must be an employee of the Company or a subsidiary of the Company from
the date the stock option is granted until three months before the date of
exercise.

If an employee disposes of stock acquired upon exercise of an ISO before
expiration of the applicable holding periods, the employee will be taxed at
ordinary income tax rates on the date of disposition measured by the lesser of:
(i) the fair market value of the stock on the date of exercise of the ISO minus
the option price or (ii) the amount realized on disposition minus the option
price, and the Company will receive a corresponding income tax deduction. In the
case of a sale where a loss, if sustained, would be recognized, the amount of
the optionee's income, and the amount of the Company's corresponding expense
deduction, will not exceed the difference between the sale price and the
adjusted basis of the shares.

The amount by which the fair market value of shares received upon exercise
of an ISO exceeds the option price constitutes of an item of tax preference that
may be subject to the alternative minimum tax. If an employee is subject to the
alternative minimum tax as a result of the exercise of an ISO, for purposes of
calculating the gain on a disposition of the stock solely for purposes of the
alternative minimum tax, the amount treated as a preference item will be added
to his tax basis for the stock. Gain realized by an employee upon the
disposition of stock acquired through the exercise of an ISO is taxable in the
year of disposition, but such income is not subject to income tax withholding if
the requisite holding periods have been satisfied. If either of the holding
periods is not satisfied, however, the disposition of the stock may result in
taxable income to the employee as additional compensation which is subject to
withholding.

NON-QUALIFIED STOCK OPTIONS

With regard to NQSOs, the employee will recognize ordinary income at the
time of the exercise of the option in an amount equal to the difference between
the exercise price and the fair market value of the shares received on the date
of exercise. Such income will be subject to withholding. When the employee
disposes of shares acquired upon the exercise of the option, any amount received
in excess of the fair market value of the shares on the date of exercise will be
treated as long-term or short-term capital gain, depending upon the holding
period of the shares. If the amount received upon sale is less than the fair
market value of the shares on the date of exercise, the loss will be treated as
long-term or short-term capital loss, depending upon the holding period of the
shares.

Section 162(m) of the Code generally prohibits the Company from deducting
compensation of a "covered employee" to the extent the compensation exceeds
$1,000,000 per year. For this purpose, "covered employee" means the chief
executive officer of the Company and the four other highest compensated officers
of the Company. Certain performance-based compensation (including, under certain
circumstances, stock option compensation) will not be subject to, and will be
disregarded in applying, the $1,000,000 deduction limitation. It is the
Company's intention that options granted under the 1994 Employee Plan qualify as
"performance-based" compensation under Section 162(m).

RECOMMENDATION AND VOTE

An affirmative vote of the holders of a majority of shares of common stock
present in person or by proxy and entitled to vote at the Annual Meeting is
required to approve the 2000 Amendment.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE 2000 AMENDMENT.

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters which may come before the Annual Meeting. If any other
matters properly come before the meeting, the accompanying proxy confers
discretionary authority with respect to any such matters, and the persons named
in the accompanying proxy intend to vote in accordance with their best judgment
on such matters.

All expenses in connection with the solicitation of proxies will be borne by
the Company. In addition to this solicitation, officers, directors and regular
employees of the Company, without any additional compensation, may solicit
proxies by mail, telephone or personal contact. Kissel-Blake Inc. may be
retained to assist in the solicitation of proxies for a negotiated fee plus
reasonable out-of-pocket expenses. The Company will, upon request, reimburse
brokerage houses and other nominees for their reasonable expenses in sending
proxy materials to their principals.

The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the Annual
Meeting, please sign the proxy and return it in the enclosed envelope.

STOCKHOLDER PROPOSALS

Stockholder proposals for inclusion in the proxy materials for the 2001
Annual Meeting should be addressed to the Company's Secretary, 480 Pleasant
Street, Lee, Massachusetts 01238 and must be received a reasonable time before
the Company begins to print and mail its proxy materials. In addition, the
Company's By-laws currently require that for business to be properly brought
before an annual meeting by a stockholder, regardless of whether included in the
Company's proxy statement, the stockholder must give written notice of his or
her intention to propose such business to the Secretary of the Company, which
notice must be delivered to, or mailed and received at, the Company's principal
executive offices not less than sixty (60) days and not more than ninety
(90) days prior to the scheduled annual meeting (except that if less than
seventy (70) days' notice of the date of the scheduled annual meeting is given,
notice by the stockholder may be delivered or received not later than the tenth
(10th) day following the day on which such notice of the date of the scheduled
annual meeting is given). Such notice must set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting, (ii) the name and address of the
stockholder proposing such business, (iii) the class and number of shares which
are beneficially owned by the stockholder; and (iv) any material interest of the
stockholder in such proposal. The By-laws further provide that the chairman of
the annual meeting may refuse to permit any business to be brought before an
annual meeting without compliance with the foregoing procedures.

By Order of the Board of Directors,

/s/ Gerard T. Feeney

Gerard T. Feeney
SECRETARY
Wave Systems Corp.
Lee, Massachusetts

May 22, 2000

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED HEREBY,
UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS). REQUESTS SHOULD BE MADE
TO WAVE SYSTEMS CORP., ATTENTION: MR. GERARD T. FEENEY, 480 PLEASANT STREET,
LEE, MASSACHUSETTS 01238.

WAVE SYSTEMS CORP.

PROXY
For Annual Meeting of the Stockholders of Wave Systems Corp.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Gerard T. Feeney, with power to act alone
and with full power of substitution, as proxy to vote the shares that the
undersigned is entitled to vote at the Annual Meeting of the Company to be held
at the Grand Hyatt, Park Avenue and Grand Central Station, New York, New York,
on Monday, June 26, 2000, commencing at 4 p.m., and at any adjournments thereof
with all the powers the undersigned would possess if personally present, as
specified on the ballot below on the matters listed below and, in accordance
with their discretion, on any other business that may come before the meeting,
and revokes all proxies given by the undersigned with respect to the shares
covered hereby.

(Continued and to be signed on Reverse Side)

Please date, sign and mail your
proxy card back as soon as possible!

Annual Meeting of Stockholders
WAVE SYSTEMS CORP.

June 26, 2000

Please Detach and mail in the Envelope Provided

The Board of Directors recommends a vote FOR the proposal listed below. Please
mark your vote with an "X", as in this example: [X]

1. Election of Directors:

[ ] FOR all nominees listed: Peter J. Sprague, John E. Bagalay, Jr., Philippe
Bertin, George Gilder, John E. McConnaughy, Jr., Steven Sprague and Nolan
Bushnell, except vote withheld from following nominees listed in space below (if
any):

- -------------------------------------------------------------------------------

[ ] VOTE WITHHELD FOR all nominees

2. Proposal to ratify the amendment to the 1994 Employee Stock Option Plan to
increase the number of shares of Class A Common Stock reserved for issuance
thereunder by 5,000,000 shares.

FOR [_]
AGAINST [_]
ABSTAIN [_]

3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

MARK HERE FOR ADDRESS CHANGE AND [_] NOTE AT LEFT

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR EACH OF PROPOSAL 1 AND PROPOSAL NO. 2.

Dated: ____________, 2000

----------------------------------
Signature

NOTE: THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREON. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD GIVE FULL TITLE AS SUCH. FOR JOINT
ACCOUNTS, EACH OWNER SHOULD SIGN. IF THE SIGNER IS A CORPORATION, PLEASE SIGN
FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER.