-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DdKhJD5zm9O8jsoBavD6K7crkbt4IN2fFG5OBJF2ae1nB+HsSewAUpYSCYCgw2Lc dq/XLz7Z36ejMhNjXYJiLA== 0000929638-02-000134.txt : 20021015 0000929638-02-000134.hdr.sgml : 20021014 20021015165240 ACCESSION NUMBER: 0000929638-02-000134 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20021015 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WAVE SYSTEMS CORP CENTRAL INDEX KEY: 0000919013 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 133477246 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 480 PLEASANT ST CITY: LEE STATE: MA ZIP: 01238 BUSINESS PHONE: 4132431600 MAIL ADDRESS: STREET 1: 480 PLEASANT STREET CITY: LEE STATE: MA ZIP: 01238 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SSP SOLUTIONS INC CENTRAL INDEX KEY: 0001078717 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 330757190 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-61273 FILM NUMBER: 02789533 BUSINESS ADDRESS: STREET 1: 17861 CARTWRIGHT ROAD CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 9498511085 MAIL ADDRESS: STREET 1: 17861 CARTWRIGHT ROAD CITY: IRVINE STATE: CA ZIP: 92614 FORMER COMPANY: FORMER CONFORMED NAME: LITRONIC INC DATE OF NAME CHANGE: 19990208 SC 13D/A 1 wave_sched13d-101602.txt WAVE SYSTEMS SCHED. 13D AMENDMENT NO. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 1 to Schedule 13D)(1) SSP SOLUTIONS, INC. (FORMERLY LITRONIC, INC.) - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 537004 10 3 - -------------------------------------------------------------------------------- (CUSIP Number) STEVEN K. SPRAGUE PRESIDENT AND CHIEF EXECUTIVE OFFICER WAVE SYSTEMS CORP. 480 PLEASANT STREET, LEE, MA 01238 (413) 243-1600 With a copy to: NEIL W. TOWNSEND BINGHAM MCCUTCHEN LLP 399 PARK AVENUE, NEW YORK, NY 10022-4689 (212) 705-7000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) OCTOBER 4, 2002 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 5 Pages) - ---------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 537004 10 3 13D Page 2 of 5 Pages ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) WAVE SYSTEMS CORP. 13-3477246 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS* OO ________________________________________________________________________________ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE ________________________________________________________________________________ 7 SOLE VOTING POWER NUMBER OF 4,702,225 SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY None OWNED BY _________________________________________________________________ EACH 9 SOLE DISPOSITIVE POWER REPORTING 4,702,225 PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH None ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,702,225 ________________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9999% ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON* CO ________________________________________________________________________________ *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 537004 10 3 13D Page 3 of 5 Pages SSP SOLUTIONS, INC. SCHEDULE 13D AMENDMENT NO. 1 NOTE: This Amendment No. 1 amends a Statement on Schedule 13D filed on October 18, 2001 by Wave Systems Corp. ("Wave"). This Amendment No. 1 is filed on behalf of Wave. This Amendment No. 1 is being filed to reflect the acquisition by Wave of 1,619,142 shares of common stock, par value $0.01 per share of SSP Solutions, Inc. ("SSP"), on October 4, 2002. There has been no change in the information set forth in response to Item 1 or 2 of the Schedule 13D. Accordingly, those Items are omitted from this Amendment No. 1. Item 3. Source and Amount of Funds or Other Consideration. Item 3 is amended to add the following: As of September 30, 2002, SSP executed a Termination Agreement and Mutual Release ("Termination Agreement") by and among SSP, BIZ Interactive Zone, Inc., a wholly-owned subsidiary of SSP ("BIZ"), and Wave. The Termination Agreement documents the mutual termination effective as of August 31, 2002 of a Purchase, Development and Deployment Agreement between BIZ and Wave dated October 2, 2000, as amended on May 10, 2001 (the "Wave Agreement"). Under the Wave Agreement, Wave was to provide development work in exchange for cash payments by BIZ of $278,000 per month from June 1, 2001 to December 1, 2002. In late August 2002, SSP, BIZ and Wave began discussions regarding entry into the Termination Agreement. Based upon the average 20-day trading price of the common stock during the period of discussions, SSP and Wave agreed to use $1.35 as the conclusive value of a share of common stock for purposes of the Termination Agreement. Under the Termination Agreement, the Wave Agreement was terminated as of August 31, 2002, the balance due to Wave under the Wave Agreement was forgiven and in exchange SSP issued to Wave 1,600,000 shares of common stock. Also in connection with the execution of the Termination Agreement, SSP delivered to Wave a convertible subordinated unsecured promissory note ("Note") in the principal amount of $270,000, which note shall be immediately convertible from time to time, at the option of Wave or SSP, into shares of common stock of SSP at the initial rate of $1.00 per share. However, the Note may only be converted to the extent Wave's beneficial ownership in SSP does not exceed 19.9999%, unless such restriction is waived by Wave upon not less than 61 days' prior written notice to SSP. Item 4. Purpose of Transaction Item 4 is amended to read as follows: As described in Item 3 on the Schedule 13D filed by Wave on October 18, 2001, Wave acquired beneficial ownership of 3,083,083 shares of SSP's common stock in connection with a merger of Litronic Merger Corp. ("Litronic") with and into BIZ, representing, as of August 24, 2001, 14.95% of SSP's total outstanding stock. As further described in Item 3 above, Wave acquired beneficial ownership of an additional 1,619,142 shares of SSP's common stock in connection with the termination of the Wave Agreement representing, as of August 14, 2002, an additional 5.0499% of SSP's total outstanding stock. CUSIP No. 537004 10 3 13D Page 4 of 5 Pages Wave does not have any plans or proposals that relate to or would result in: (i) the acquisition by any person of additional securities of SSP, or the disposition of securities of SSP; (ii) any extraordinary corporate transaction; (iii) any sale or transfer of a material amount of assets of SSP or any of its subsidiaries; (iv) any change in the present board of directors or management of SSP; (v) any material change in the present capitalization or dividend policy of SSP; (vi) any other material change in SSP's business or corporate structure; (vii) any changes in SSP's charter, bylaws or instruments corresponding thereto, or other actions which may impede the acquisition of control of SSP by any person; (viii) causing a class of securities of SSP to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (ix) a class of equity securities of SSP becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (x) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. Items 5(a), 5(b) and 5(c) are amended to read as follows: (a) Wave owns 4,702,225 shares of common stock of SSP, which equal approximately 19.9999% of the total 23,511,243 outstanding shares of common stock of SSP as of October 4, 2002. (b) Wave has sole voting and dispositive power to all 4,702,225 shares that it owns. (c) Other than as described in Items 3 and 4 above, Wave has not effected any transactions in SSP's common stock during the past 60 days. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6 is amended to delete any reference to the Wave Agreement. Item 7. Material to be Filed as Exhibits Exhibit 99.A which was previously filed, is the Agreement and Plan of Merger, dated July 3, 2001 by and among SSP, Litronic and BIZ. Exhibit 99.B is the Purchase, Development and Deployment Agreement between BIZ and Wave. Exhibit 99.C is the Amendment No.1 to the Purchase, Development and Deployment Agreement between BIZ and Wave. Exhibit 99.D is the Termination Agreement and Mutual Release by and among SSP, BIZ and Wave. CUSIP No. 537004 10 3 13D Page 5 of 5 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 10, 2002 WAVE SYSTEMS CORP. By: /s/ STEVEN K. SPRAGUE ------------------------------------- (Signature) Steven K. Sprague. its President and Chief Executive Officer ---------------------------------------- (Name/Title) Attention. Intentional misstatements or omissions of fact constitute federal criminal violations (see 18 U.S.C. 1001). EX-99.H 3 exhibit-99b.txt PURCHASE, DEVELOPMENT AND DEPLOYMENT AGREEMENT Exhibit 99.B PURCHASE, DEVELOPMENT, AND DEPLOYMENT AGREEMENT THIS PURCHASE, DEVELOPMENT, AND DEPLOYMENT AGREEMENT ("Agreement") is entered as of October, 2000 ("Effective Date") between BIZ Interactive Zone, Inc. ("BIZ."), a Delaware corporation located at 2030 Main Street, 12th Floor, Irvine, CA 92614, and Wave Systems Corporation ("Wave"), a Delaware corporation located at 480 Pleasant Street, Lee, MA 02138. RECITALS WHEREAS, Wave is in the business of the design, development, manufacture, and sale of technologies and services to secure and sell digital content; WHEREAS, BIZ desires Wave to develop an Embassy-Enabled Product that adapts the Embassy Chip Technology and other aspects of the Wave System to operate as an embedded, secure, and open platform for trusted access to digital cable set-top box and cable and telecommunications gateway environments; WHEREAS, BIZ desires to retain Wave to develop Applets that facilitate content preparation, licensed metering, digital rights management, data security technology and other intellectual or financial electronic transaction management for use in the health care and education markets; WHEREAS, BIZ desires to retain Wave to develop SSP Applications that facilitate content preparation, licensed metering, digital rights management, data security technology and other intellectual or financial electronic transaction management for use in the health care and education markets; WHEREAS, BIZ currently sells its own brand of products ("SSP Products") and desires to resell SSP Products that contain the Wave Chip Technology, Wave Local Software and Embassy Applets on a value added and branded label basis. NOW, THEREFORE, in consideration of the mutual promises contained herein the parties agree as follows: 1. DEFINITIONS. "Agreement" means this agreement. "Applets or Embassy Applets" means specialized software executables that perform various functions and are loaded from outside the Embassy-Enabled Product into an Embassy Chip. "Applet Certification Authority" means the company authorized by Wave to receive Embassy Applets from developers, certify the ownership and business relationship of such applets and then encrypt and digitally sign such applets using authorized codes. "BIZ/Wave Agreement" means the Technology Licensing and Authorization Agreement executed on August 18, 2000 by and between BIZ and Wave and a copy of which is attached hereto as Exhibit A. "Confidential Information" means all nonpublic information of either party, in written, oral, graphic, or computer database form concerning technology, marketing plans, implementation strategies, sales and forecast information, financial data, future products, and other sensitive trade secret information, provided that if in written form such information must be marked "Confidential" or if disclosed orally must be identified as Confidential Information at the time of disclosure and confirmed in writing as confidential within 30 days after such oral disclosure. Notwithstanding the foregoing, any oral or written information provided to either receiving party concerning the details and requirements under this Agreement and its described technology shall be considered Confidential Information, regardless of whether such information is marked or confirmed as confidential. Except for information concerning the Embassy Clip Technology, Confidential Information does not include information which: (a) the receiving party can prove it already knew at the time of receipt from the disclosing party; (b) has come into the public domain without breach of confidence by the receiving party; or (c) was received from a third party without restrictions on its use; (d) the receiving party can prove it independently developed without use of or reference to the disclosing party's data or information; or (e) which the disclosing party agrees in writing is free of such restrictions. "Content" means software, information, and other data distributed via the Wave System. "Embassy Chip Technology" means proprietary integrated circuit designs, consisting of silicon design modules and Embassy Firmware, for an integrated circuit or portion of an integrated circuit which contains circuits and firmware specific to the Wave System and which works in conjunction with a computer or other electronic device such as a cable TV set-top box, and other parts of the Wave System to execute transactions, locally store usage data, and report that usage to the parties. The term, Embassy Chip Technology, shall also apply to any integrated circuit technology utilized by Wave which replaces the current Embassy Chip Technology, regardless of whether such replacement technology is referred to by Wave using the name "Embassy," as long as such replacement technology meets the foregoing description. "Embassy Chip" means Wave's proprietary integrated circuit design that contains the Embassy Chip Technology. "Embassy-Enabled Product(s)" means the product developed pursuant to Section 2(a), which contains the Embassy Chip Technology, Embassy Firmware and/or Wave Local Software modified by Wave for BIZ. "Embassy Firmware" means the firmware, including an operating system, which is part of the Embassy Chip. "Field of Use" means the worldwide educational market consisting of public and private schools and the medical market for patient/doctor record management. "Intellectual Property Rights" means all current and future trade secrets, copyrights, patents and other patent rights, trademark rights, service mark rights, mask work rights and any and all other intellectual property or proprietary rights now known or hereafter recognized in any jurisdiction. "Net Wave Revenue" means all revenue collected from the sale, licensing, or rental of Content decrypted and metered via the Wave System and Embassy-Enabled Products distributed by BIZ or its sublicensees, less payments actually made to third parties for the furnishing or delivery of Content, third-party transaction and processing fees (including without limitation credit-card and "electronic cash" transaction fees), shipping and handling charges, excise, sales, use, and turnover taxes, custom duties, charges for credit, collections, and bad debt, and credits for returns, and other customary and normal trade credits. "Permission or Permissioned" means the process of authorizing a validly signed Embassy Applet to be loaded into an Embassy-Enabled Chip through the secure interaction between the Applet Certification Authority and the Trust Assurance Network. "Project" means the development of the Embassy-Enabled Product pursuant to Section 2 of this Agreement. "Specifications" means the specifications for the development of the Embassy-Enabled Product to be agreed upon by the parties immediately following execution of this Agreement. "SSP BIZ/Wave Applications" means the applications Wave develops for and licenses to BIZ upon request by BIZ, provided, however that the parties shall maintain joint ownership of all such SSP Applications. "Trust Assurance Network" means the computer servers which administer the core security functions for the Wave System, such as dispensing unique codes or "keys" to initiate or "personalize" each unit of Embassy-Enabled Product, registration of such units, and Embassy Applet Permissioning. The Trust Assurance Network also includes the computer servers which encrypt and sign and certify ownership for Embassy Applets so that they can be distributed to Embassy-Enabled Products. "Wave Intellectual Property" means all current and future worldwide patents and other patent rights, copyrights, trademarks, trade secrets, know-how, source code and all other intellectual property rights and the related documentation thereof exclusively owned by Wave, including but not limited to, the Wave System. "Wave Local Software" means the object-code version of device drivers, application frameworks, utilities, and other software furnished by Wave to BIZ in object-code from which are loaded on Embassy-Enabled Products to facilitate communication and interoperability between Embassy Chips, the Embassy-Enabled Products on which such software is loaded, and other components of the Wave System. "Wave System" means a computer-based system which facilitates the personalization of Embassy-Enabled Products, the creation and certification of Embassy Applets, the Permissioning and distribution of such Applets, the distribution or rental of Content for a fee, the measuring of usage of Content, the billing and collection for such usage, and includes, but is not limited to, Wave's servers, hardware, devices, applications and protocols, Embassy Chip Technology, Embassy Firmware, Applets and SSP BIZ/Wave Applications. 2. DEVELOPMENT OF THE EMBASSY-ENABLED PRODUCT (a) Wave agrees to develop the Embassy-Enabled Product, to be used with an embedded secure and open applet environment for the cable set-top box, other related delivery platforms for set top boxes or home gateways powered and/or controlled by Broadcom Corporation, or vendors of silicon microprocessors, the development of which shall be pursuant to the terms and conditioned set forth in this Agreement. Such development shall be limited to the integration of Embassy Chip Technology into no more than two chipsets, including the software development required to port related drivers and software to support two set top or home gateway operating systems. Wave agrees to develop the Embassy-Enabled Product pursuant to the development schedule in Section 3. Wave and BIZ shall jointly agree upon the selection of chipsets and operating systems that will be integrated. (b) Wave agrees to work with BIZ to integrate the technologies necessary to develop the Embassy-Enabled Product. The terms and conditions of integration shall be pursuant to a separate agreement between the parties. (c) BIZ agrees to provide all necessary assistance to Wave in order for Wave to complete the Project. (d) Wave agrees to develop for and license to BIZ the SSP Applications in Attachment A, which shall utilize the Wave System and Wave services. (e) Wave agrees to work with Broadcom, through BIZ, to integrate the EMBASSY technology into selected Broadcom PC chips for peripherals or adapters supported by the Windows operating system. Wave will also make any necessary changes for the EMBASSY Local software and Wave applications to support the new chip implementations of the EMBASSY technology. 3. SCHEDULE OF DEVELOPMENT. (a) The development of the Project shall be pursuant to the schedule set forth in an agreement, which shall be modified by the parties from time to time. (b) BIZ and Wave shall each assign a full time project manager who shall be responsible for (i) facilitating the development of the Embassy-Enabled Product under the Agreement and (ii) performing general management functions in representation of their respective company's objectives under this Agreement. 4. GRANT OF LICENSES. (a) Pursuant to the terms and conditions of this Agreement, including the conditions set forth in Section 5, Wave grants BIZ: (i) an exclusive, worldwide, license, to distribute the Embassy- Enabled Product, developed in Section 2(a), to Broadcom, Conexant, EDS, Cap Gemini/Ernst & Young and Deloitte & Touche, pursuant to Wave's standard terms and conditions. (ii) an exclusive, worldwide, license to distribute and to sublicense the SSP Applications developed by Wave in Section 2d, to Broadcom, Conexant, EDS, Cap Gemini/Ernst & Young and Deloitte & Touche in the Field the Use, pursuant to Wave's standard terms and conditions. (iii) a non-exclusive, worldwide, license to distribute and to sublicense the SSP Applications, developed by Wave in Section 2d, outside the Field the Use and pursuant to Wave's standard terms and conditions. 5. CONDITIONS AND RESTRICTIONS. (a) The exclusive license granted in Section 4(a)(i) and 4(a)(ii) shall be terminated in the event: (i) BIZ fails to secure a contract with Broadcom to integrate the Embassy Chip Technology in at least one chipset by September 2001, unless Wave has not completed and delivered the applications required to secure the contract with Broadcom, in which event the period of time shall be extended to six months after the delivery of such applications; or (ii) BIZ fails to produce a set-top box that includes the Embassy- Enabled Product within eight months after the contract between BIZ and Broadcom is executed. (b) BIZ agrees that the Wave System is an open system and that generally available components or services available from Wave may be used by third parties to build competitive solutions to the SSP application's the field of use. (c) Wave agrees to provide a reasonable amount of support to BIZ to integrate the Embassy-Enabled Product into authorized third party products. 6. TRADEMARK RIGHTS. BIZ requests and Wave agrees to provide certain markings and identification, which includes the trademark(s) and/or trade name of BIZ and "SSP", on the Embassy-Enabled Products ordered and delivered to BIZ. Such markings and trademarks shall be marked in accordance with the requirements of BIZ provided that any such BIZ trademarks and/or trade names shall, in Wave's reasonable determination, be compatible with Wave's trademarks, trade names and/or copyright notices contained on the Embassy Enabled Products. 7. FEES (a) BIZ agrees to prepay license fees for the distribution of the Embassy- Enabled Product and Applets. These prepaid fees are not refundable and will be paid over a fifteen (15) month period. The total license fee paid will be $8,000,000 US Dollars with $2,000,000 US Dollars paid on every subsequent 90th day anniversary (or next business day) due and payable over a fifteen (15) month period from the date of execution of this Agreement. Wave agrees to supply BIZ with 10 million permissioned Applets and 5 million prepaid licenses for the Embassy Enabled Product. (b) BIZ shall pay Wave a development fee of $2,000,000 US Dollars for the development of the SSP Applications within thirty (30) days after the effective date of this Agreement. (c) Fees for the Embassy-Enabled Product shall be F.C.A. origin (Seller's shipping dock). All such fees are exclusive of the costs of transportation, insurance, taxes, customs, duties, landing, storage and handling fees, and/or documents or certificates required for exportation or importation, which will be separately itemized and billed to BIZ in accordance with the billing and payment provisions of this Agreement. (d) Any payment that is not received by Wave within fifteen (15) days after it is due shall bear interest at a rate equal to one and one half percent (1-1/2%) per month or the highest rate permitted by applicable law, whichever is less, on the unpaid amounts outstanding from the date such amounts became due and owing until paid in full. 8. DELIVERY SCHEDULE. (a) The delivery dates for the Embassy-Enabled Product to BIZ shall be agreed upon within thirty (30) days after the Effective Date of this Agreement, pursuant to a separate written agreement. The delivery schedule shall be agreed upon by each party's Project Manager, and subject to change from time to time upon written notice to the other party. (b) Wave agrees to immediately notify BIZ in writing of any anticipated delays in delivery, provided that Wave shall notify BIZ in writing setting forth the reasons for such delay. 9. COMMODITY CLASSIFICATION. Wave shall provide BIZ with a copy of the Commodity Classification for the Embassy-Enabled Product or, if this is not available, Wave shall provide BIZ with the ECCN that was used by Wave for self certification. A copy of the Commodity Classification is required for any product containing security or encryption technology. In addition, Wave shall advise BIZ as to any license exception, if applicable, pursuant to which the Embassy-Enabled Product may be exported. 10. ACCEPTANCE. Prior to acceptance of the Embassy-Enabled Product, BIZ shall test such Embassy-Enabled Product at BIZ's facility to determine conformance with the Specifications which shall be set forth in a future attachment to this Agreement or with the parties' agreed-upon testing and acceptance criteria, BIZ shall notify Wave of such failure and the parties will promptly discuss means to resolve any such failure. Wave shall have up to thirty (30) days (or such longer period as the parties may agree) to deliver to BIZ a conforming Embassy-Enabled Product. If Wave fails to deliver such conforming Embassy-Enabled Product within such thirty (30) day period, absent separate a agreement, BIZ shall have the right, without liability, to either cancel continued development for that Embassy-Enabled Product and any other products, the acceptance of which is impractical in BIZ's reasonable opinion as a result of Wave's failure to meet the Specifications, or require expedited shipping of the conforming Embassy- Enabled Products at Wave's sole cost. After initial acceptance of the Embassy- Enabled Product or a modified Embassy-Enabled Product, further deliveries of such Embassy-Enabled Product shall be deemed accepted upon delivery. 11. INSPECTION RIGHTS. BIZ shall have the right to perform vendor qualifications and/or on-site source inspections at Wave's development or manufacturing facilities. If an inspection or test is made on Wave's premises, Wave shall provide BIZ's inspectors reasonable access to the facilities and reasonable assistance at no additional charge. BIZ must provide Wave a minimum of ten (10) days prior notice of such inspection. Such inspection shall be conducted during normal business hours and in compliance with Wave's safety and security requirements. 12. REGULATORY AGENCY COMPLIANCE. All Embassy-Enabled Products delivered, hereunder shall comply in all material respects with the regulatory agency requirements. 13. ENGINEERING CHANGE. In the event that BIZ determines that the Embassy-Enabled Product requires further technical modifications, BIZ shall provide Wave with written notice detailing the proposed modifications and Wave shall in good faith determine the feasibility of implementing such proposed modifications. If Wave determines that it is feasible to implement the modifications, Wave and BIZ agrees to work together in good faith to implement such modifications to the Embassy-Enabled Product. 14. ENGINEERING CHANGE ORDERS. Wave shall provide reasonable prior written notice to BIZ of any material change, improvement, enhancement or update that affects the form, fit or function to the Embassy-Enabled Product, or to any related product, or any changes to Wave's part number for a Embassy-Enabled Product prior to its implementation. BIZ shall respond in writing to Wave's notice of any material change, improvement, enhancement or upgrade within twenty-one (21) days after receiving such notice. If BIZ does not receive such a response from Wave, the material change, improvement, enhancement or upgrade shall be deemed accepted. Wave may shorten BIZ's response time if the change is intended to improve safety or reliability. At Wave's request, the parties shall work together in good faith to implement any changes, improvements, enhancements, upgrades or other modifications to the Embassy-Enabled Products. 15. REJECTION OF CHANGE ORDERS. BIZ shall not unreasonably withhold acceptance of a proposed change, provided, however, that BIZ may reject a proposed change for good cause. If BIZ rejects a proposed change, the parties will discuss in good faith alternatives to such rejection. Upon rejection of any proposed change, BIZ shall be entitled to terminate in whole or in part, any affected Embassy-Enabled Product remaining undelivered. 16. UNAUTHORIZED CHANGES. If an ECO is implemented without the written approval of BIZ, Wave shall be liable for repair and/or rework of all Embassy-Enabled Products affected, including to, but not limited to, Embassy-Enabled Products in transit, product in Finished Good Inventory, and any Embassy-Enabled Product located with a reseller or at an end user location. 17. OWNERSHIP OF INTELLECTUAL PROPERTY. For any joint conception, invention and development of technology, the parties agree that all Intellectual Property Rights conceived, created, made, or first fixed in a tangible medium of expression during the term of this Agreement shall be as follows: (i) joint Intellectual Property Rights when accomplished by either party's personnel. Wave and BIZ agree that throughout the term of this Agreement they shall cooperate reasonably and in good faith to decide jointly the manner in which their respective interests in Joint Intellectual Property shall be perfected and enforced. Specifically, Wave and BIZ shall jointly decide: (i) the subject matter for which patent applications and applications for copyright registrations will be prepared; (ii) the resources to be utilized in the preparation and prosecution of such applications; (iii) the parties' rights to review and/or approve such applications and other papers prior to filling in, or submission to, the patent, copyright and trademark offices in the United States; (iv) the allocation of expenses incurred in the preparation, prosecution and maintenance of patent applications, patents, and copyright registrations and the like; (v) matters regarding the enforcement, through litigation, licensing or otherwise of the Joint Intellectual Property against third parties; and (vi) the manner in which revenue resulting from enforcement of Joint Intellectual Property will be shared between Wave and BIZ. Should a party choose not to participate in securing or protecting an element of Joint Intellectual Property (by notifying the other party in writing to such effect), the other party may secure or protect its claims to such Joint Intellectual Property and shall be entitled to reap the benefit of its efforts without accounting to the other party, including without limitation retaining the full amount of any settlement, or damage award from a third party. INFRINGEMENT BY THIRD PARTIES. If either party learns of any possible infringement or misappropriation of the other party's Intellectual Property Rights related to the Products, it shall immediately give notice thereof to the other party. Each party agrees to cooperate with the infringed party's reasonable efforts to seek legal remedies for such infringements and misappropriations. ALTERATION OF THE PRODUCT. All modifications to the Products shall be done jointly by the parties or by prior joint written consent of the pasties. No modifications will be made that would result in a violation of the license restrictions set forth in this Agreement or the BIZ/Wave Agreement. 18. INDEMNIFICATION. (a) Subject to the provisions of Section 18c and 18d, Wave shall defend, indemnify, and hold BIZ and its sublicensees harmless against any claim that (i) the Embassy Chip Technology or other portions of the Wave System infringe a patent, copyright, or trade secret of a third-party when used in accordance with the terms of this Agreement, (ii) Wave's trademarks or service marks infringe the trademark rights of a third party when used in accordance with the terms of this Agreement, or (iii) the Wave System or any act or omission of Wave or its agents causes damages to a third party. BIZ agrees to look to Wave only, and not to its' Authorized Chip Supplier, for indemnity regarding a problem with the Wave System or the Embassy Chip Technology as embodied in the Embassy-Enabled Products. (b) Subject to the provisions of Section 18c and 18d, BIZ shall defend, indemnify, and hold Wave harmless against any claim that (i) BIZ's or its sublicensees' Embassy-Enabled Products infringe a patent, copyright, or trade secret of a third-party, unless such infringement would not have occurred but for the incorporation of the Embassy-Enabled Chip into such Embassy-Enabled Product, (ii) BIZ's trademarks or service marks infringe the trademark rights of a third party when used in accordance with the terms of this Agreement, or (iii) BIZ'S or its sublicensees' Embassy-Enabled Products (other than the Embassy Chip Technology) or any act or any act or omission of BIZ or its agents causes damages to a third party. (c) In providing indemnification under Sections 18a or 18b, the indemnifying party shall have the right, at its option, either to obtain for the indemnified party the right to continue using the allegedly infringing technology, substitute other technology with equivalent functional capabilities, or modify the technology so that it is no longer infringing while retaining equivalent functions. If such options are not reasonably available, the indemnified party's exclusive remedy shall be to terminate this Agreement and to cease using the technologies in question. (d) As conditions of the indemnified party receiving indemnification under Sections 18(a) or 18(b), the indemnifying party must receive (i) prompt notice of a claim of infringement; (ii) the right to control the defense against such claim and related settlement negotiations; and (iii) reasonable cooperation from the indemnified party. 19. WARRANTIES. (a) Each party represents and warrants to the other that it has full corporate power and authority to enter into this Agreement and perform its terms, and that neither the execution of this Agreement nor the performance of its terms shall constitute or result in a breach or default in any agreement, commitment or understanding to which it is a party and this Agreement is the valid, binding, and enforceable agreement of such party. (b) The warranty, if any, offered by Wave to its end-users is the entire warranty made by Wave concerning the Wave System. If BIZ receives complaints from its customers concerning the Wave System, then BIZ's sole remedy shall be to seek indemnity pursuant to Section 18(a). WAVE MAKES NO WARRANTIES, EXPRESS OR IMPLIED, TO BIZ OR BIZ'S SUBLICENSEES CONCERNING THE WAVE LOCAL SOFTWARE, THE EMBASSY CHIP TECHNOLOGY, OR THE WAVE SYSTEM. WAVE SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. BIZ shall not enlarge upon or alter the foregoing provision on behalf of Wave with respect to BIZ'S sublicensees. 20. TERM AND TERMINATION. This Agreement shall commence on the date first written above and, shall continue in force until terminated as provided herein. This Agreement can be terminated by either party upon written notice to the other for a material breach of this Agreement by the other party, which is not cured within 30 days after receipt of written notice of such breach. The tern of this Agreement shall be for three years, with an option to extend for a mutually agreed upon period, if the parties so wish. 21. LIMITATION ON LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS) RESULTING FROM THE BREACH OR TERMINATION OF THIS AGREEMENT. Except for liability under Sections 18 or 22, the liability of the parties to each other under this Agreement shall not exceed the amount of fees paid to BIZ by Wave hereunder. 22. CONFIDENTIALITY. During the term of this Agreement, each party to this Agreement may disclose certain "Confidential Information" to the other party. Each party shall refrain from using any and all Confidential Information of the other party for any purposes or activities other than those specifically authorized in this Agreement. Except as otherwise specifically permitted herein or pursuant to written permission of the party to this Agreement owning the Confidential Information, neither party shall disclose or facilitate disclosure of Confidential Information of the other party to anyone without the prior written consent of the other party, except to its employees and to consultants who need to know such information for carrying out the activities contemplated by this Agreement and who agree to be bound by the requirements of this Section. Without obtaining the other party's prior written consent, neither party shall copy or duplicate any Confidential Information of the other party by any means or technique except that, unless otherwise expressly restricted herein, both parties are permitted to make those copies which are necessary for their internal company use or which are necessary to carry out the terms of this Agreement. All files, lists, records, documents, charts, specifications, and computer programs which incorporate or refer to all or a portion of the Confidential Information shall remain the sole property of the owner thereof. Such materials shall be promptly returned or destroyed (i) upon the owner's reasonable request, or (ii) upon termination of this Agreement as provided herein, whichever is earlier. 23. EXPORT LAW COMPLIANCE. Neither party will export or reexport, directly or indirectly, the Embassy- Enabled Products or technical data acquired under this Agreement or the "direct product" of software programs or such technical data to any country for which the United States Government or any agency thereof, at the time of export, requires an export license or other governmental approval, without first obtaining such license or approval. The term "direct product" as used herein means the immediate product (including processes and services) produced directly by the use of the technical data or software programs. Both parties will cooperate, to effect compliance with all applicable import and/or export regulations. In addition, the parties agree to comply with all applicable local country import and/or export laws or regulations in the country(ies) of procurement, production and/or end destination of the Embassy-Enabled Product. Both parties understand that the foregoing obligations are legal requirements and agree that they shall survive any term or termination of this Agreement. 24. ASSIGNMENT. Except as specifically permitted herein, neither party shall assign the licenses or its duties or responsibilities under this Agreement without the express written permission of the other party. The foregoing prohibition shall not apply in the case of a sale of all or substantially all of a party's assets or stock, or merger. This Agreement shall be binding upon and inure to the benefit of a party's permitted successors and assigns. 25. CHOICE OF LAW/DISPUTE RESOLUTION. This Agreement shall be governed and interpreted under the laws of the State of California, excepting those portions related to conflicts of laws. Except with matters requiring an injunction, any dispute arising out of or relating to this Agreement, or breach thereof, shall be first submitted to the senior management of each party for resolution. If the dispute cannot be resolved within 30 days after such matter is referred to senior management, then the dispute shall be submitted to binding arbitration in the English language in Santa Clara County, California and in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") then in effect. The arbitration shall be conducted by a single arbitrator mutually acceptable to both parties. If the parties cannot agree on a single arbitrator, then the San Francisco office of the AAA shall appoint the arbitrator. In any event, the arbitrator shall have extensive experience with matters concerning computers and integrated circuits. All discovery must be concluded within 60 days after the submission to arbitration. The decision of the arbitrator shall be final and may be entered as judgment in any court of competent jurisdiction. The arbitrator shall determine the allocation of arbitration costs and reasonable attorneys' fees between the parties according to the relative merits of each party's case. EACH PARTY HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY. Notwithstanding the foregoing, this arbitration clause shall not apply to any action for injunctive relief brought by either party for the purpose of protecting or enforcing rights in any intellectual property, whether patent, trademark, trade secret, copyright, or otherwise, or in any Confidential Information. In the event of misuse or infringement, actual or threatened, of any Confidential Information or intellectual property rights, notwithstanding anything else in this Agreement, and in addition to any other relief or remedy available, either party, without first resorting to the 30 day resolution procedure described above, shall be entitled to seek and obtain relief and orders from the courts and other authorities, including an injunction restraining violations of obligations with respect to Confidential Information and intellectual property. 26. NOTICES. Unless otherwise provided, any notice to be given hereunder shall be in writing and shall be effective when received. Such notice shall be sent by first class mail, postage prepaid and marked for delivery by Certified or Registered mail, return receipt requested, or other form of receipted delivery, addressed to receive the notice at the address given for it below. Any changes for such notices may be specified by written notification to the other party made following the requirements in this Section 33. President CEO Wave Systems Corp. Biz Interactive Zone 480 Pleasant Street 2030 Main Street, 12th Floor Lee, Massachusetts 01238 Irvine, California 92614 27. HEADINGS. The various headings and sections of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement. 28. WAIVER. The waiver by either party of a breach or default in any of the provisions of this Agreement by the other party shall not be construed as a waiver of any succeeding breach of the same or other provisions. Any delay or omission on the part of either party to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate as a waiver of any breach or default by the other party. Any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 29. FORCE MAJEURE. Neither party shall be liable to the other party for any delay or omission in the performance of any obligation under this Agreement, other than an obligation to pay money, where the delay or omission is due to any condition beyond the reasonable control of the party obliged to perform, including but not limited to, strikes or other labor difficulties, acts of God, electrical power or communications outages, acts of government, war, riots, or embargoes. 30. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. In the event that any provisions contained in this Agreement are held to be unenforceable, this Agreement shall be construed without such provisions. 31. RELATIONSHIP OF THE PARTIES. The relationship of the parties established by this Agreement is of contracted developer or independent contractors, and nothing in this Agreement shall be construed to give either party the power to direct or control the daily activities of the other party; or constitute the parties as principal and agent, employer and employee, partners, joint venturers, co-owners or otherwise as participants in a joint undertaking. The parties understand that, except as specifically provided for in this Agreement, neither party grants the other party the power or authority to make or give any agreement, statement, representation, warranty, or other commitment on its behalf, or to enter into ally contract or otherwise incur any liability or obligation, express or implied, on its behalf, or to transfer, release, or waive any of its rights, title or interests. Neither this Agreement nor any terms and conditions contained herein shall be construed as granting a franchise as defined by state law or 16 CFR Section 436.2(a). 32. MODIFICATION OF AGREEMENT. This Agreement shall not be modified, amended or in any way altered except by an instrument in writing signed by both parties. Approval or consents hereunder of a party shall also be in writing. 33. ENTIRE UNDERSTANDING. The parties acknowledge that they have read this entire Agreement and that this Agreement and the Exhibits attached hereto, which are incorporated into and made part of this Agreement, constitute the entire understanding between the parties with respect to the subject matter hereto and in the event any terms or conditions of prior Agreements including Exhibits attached hereto, between the parties are in conflict or are contradictory to the terms and conditions stated in this Agreement, the terms and conditions of this Agreement supersede all prior or contemporaneous agreements between the parties whether oral or written relating to the same subject matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. WAVE SYSTEMS CORP. BIZ INTERACTIVE ZONE ____________________________________ _____________________________________ Authorized Signature Authorized Signature ____________________________________ _____________________________________ Printed Name Printed Name ____________________________________ _____________________________________ Title Title Attachment A Project 1 Work with BIZ's partners to build a solution for schools to have multiple private networks for students and teachers. This network would include secure access to web pages, Encrypted data stored on servers, Document distribution, secure Email attachments. The system can be administered by teachers and or IT dept will not expose keys to any users. Project 2 Worked with BIZ's and through BIZ, it's partners such as EDS and Cap Gemini/Ernst and Young; to build a embedded secure open platform solution of Embassy Applets for medical information distribution, accountability, and linking to appropriate electronic business transaction functionality that meets or exceeds HIPAA standards or regulations. EX-99.H 4 exhibit-99c.txt AM/1 TO PURCHASE, DEVELOPMENT & DEPLOYMENT AGMT Exhibit 99.C AMENDMENT NO. 1 TO PURCHASE, DEVELOPMENT, AND DEPLOYMENT AGREEMENT This Amendment No. 1 (the "Amendment"), dated May 10, 2001, modifies the Purchase, Development, and Deployment Agreement (the "Agreement") between BIZ Interactive Zone ("BIZ") and Wave Systems Corp. ("Wave") dated October 2, 2000. The parties agree as follows: 1. DEFINITIONS. The definitions in the Agreement shall apply to this Amendment. 2. THE PROJECT. Section 2 of the Agreement, describing the development work to be accomplished by Wave under the Project, is modified to include "porting" or adapting the Embassy Chip to operate under the Linux operating system in a set top box or a cable modem. The development, work described above shall supercede and replace that described in Section 2 of the Agreement. The development work under the Project shall be owned by Wave and BIZ, and BIZ shall continue to have distribution rights with respect to Embassy-Enabled-Product as set forth in the Agreement. Wave and BIZ agree to establish a timeline, review milestones and interim delivery schedules ("Milestones") for the Project. Upon reaching the agreed upon Milestones, Wave shall deliver the required item. BIZ shall then provide in writing either acceptance or rejection (and the reasons for any rejection) of the completed Milestone. 3. PAYMENT. a. Sections 7a and 7b of the Agreement are deleted. For the additional development work to be accomplished under the Project as described in Section 2, above, BIZ agrees to pay Wave $277,778 per month (the "Monthly Payment") for eighteen (18) months beginning June 1, 2001. If Wave and BIZ jointly agree to accelerate the development delivery time, they will also consider accelerated payment terms. There shall be a ten (10) business day grace period following the first of each mouth for the Monthly Payment (the "Due Date"). b. Simultaneously with the execution of this Amendment, BIZ will place with Wave an open $5,000,000 purchase order in the form of Exhibit A to this Amendment. 4. DEFAULT. a. In the event the $5 million in purchase order is not entirely used by June 30, 2003, in addition to other available remedies, the rights granted to BIZ in Sections 4(a)(i) and 4(a)(ii) of the Agreement shall, at Wave's option, become non-exclusive. b. If BIZ fails to pay any installment under Section 3(a) in full, when and as the same shall become due and payable according to the terms of this Amendment and if said default is not cured within 30 days after written notice thereof is received by BIZ (each, a "Default," and collectively, the "Defaults"), the unpaid portion of the installment shall automatically convert into a right (each, a "Stock Acquisition Right," and collectively, the "Stock Acquisition Rights"), exercisable by Wave upon five (5) business days' prior written notice to BIZ, to acquire a number of fully paid, nonassessable shares of common stock of BIZ, par value $0.001 per share ("BIZ Common Stock"). Such number of shares of BIZ Common Stock to be received by Wave upon exercise of the Stock Acquisition Rights shall be determined by dividing the Fair Market Value (defined below) of a share of BIZ Common Stock on the date of exercise of the Stock Acquisition Right into the aggregate Credit Amount (defined below) related to the Defaults. The "Fair Market Value" shall mean the following: (i) if BIZ Common Stock is listed on a national securities exchange or the Nasdaq National Market ("Publicly Traded"), the fair market value of BIZ Common Stock per share shall be the average of closing price of BIZ Common Stock for the ten (10) trading-day period prior to the date of exercise, as reported with respect to such market (or composite of markets, if more than one) in which BIZ Common Stock is then traded or (ii) if BIZ Common Stock is not then Publicly Traded, the fair market value of BIZ Common Stock per share shall be the per share price paid for shares of any class of BIZ stock in the most recent bona fide, arm's length equity financing (yielding net proceeds of at least $500,000) consummated before the date of exercise of the Stock Acquisition Right. The "Credit Amount" with respect to any Default under Section 3(a) shall be the portion of the installment payment that is not paid on the Due Date of such installment payment. c. Wave's Stock Acquisition Right with respect to a Default may be exercised by Wave at any time within ten years of the date of such Default. The Stock Acquisition Rights not exercised by Wave shall be automatically exercised immediately prior to the occurrence of the following events: (i) the closing of a public offering of BIZ Common Stock pursuant to an effective registration statement under the Securities Act of 1933, if such Stock Acquisition Right is acquired at a time when BIZ Common Stock is not Publicly Traded, (ii) the commencement of voluntary or involuntary proceedings to wind up and dissolve BIZ or its successor in interest, as the case may be, or (iii) sale of all or substantially all of the assets of BIZ. d. BIZ may, at anytime as long as any of the Stock Acquisition Rights is outstanding and not exercised, elect to redeem any of the Stock Acquisition Rights and convert the aggregate Credit Amount, all or in part, into BIZ Common Stock, or common stock of its successor in interest, provided that the shares issued have been previously registered. e. Within 30 calendar days of the date of this Amendment, BIZ shall take all necessary corporate action to reserve 1,150,000 shares of its authorized but unissued common stock for issuance to Wave pursuant to paragraph b above and shall provide Wave with evidence of such action in a form which is reasonably satisfactory to Wave. BIZ shall keep such reservation of shares in effect until all sums payable by BIZ under section 3(a) have been paid in full or until all Stock Acquisition Rights received by Wave have been exercised or deemed exercised. f. Upon exercise of the Stock Acquisition Right for a particular Credit Amount and issuance of shares of BIZ Common Stock for such Credit Amount, BIZ shall not be obligated to pay and Wave shall have no further right to claim such Credit Amount, and the number of reserved shares shall be reduced by the number of shares issued in such exercise. g. In consideration of said reserved shares, Wave shall complete and deliver to BIZ no later than December 31, 2002 the "development work to be accomplished under the Project" as stated in Section 2. BIZ shall have the right to test the delivered product for 60 calendar days following the delivery date, and report any corrections required within the aforesaid 60 calendar day period. Wave shall have an additional 120 calendar days to make the appropriate corrections, and in the event that Wave cannot deliver the development work in proper working order, any stock reserved under this Agreement shall release from encumbrance under this Amendment No. 1, and Wave shall refund to BIZ all cash payments made and Credit Amounts claimed during the period following the last completed Milestone signed-off by BIZ. If the "development work to be accomplished under the Project" is not delivered to BIZ by December 31, 2002, in addition to other available remedies, the rights granted to BIZ in Sections 4(a)(i) and 4(a)(ii) of the Agreement shall, at BIZ's option remain exclusive, and Section 4(a) of this Amendment No. 1 shall be automatically terminated. h. If, prior to the payment in full of all amounts payable by BIZ pursuant to Section 3(a), BIZ or its successor in interest is eligible to use Securities and Exchange Commission ("SEC") Form S-3 or any successor form adopted by the SEC for substantially the same purpose, BIZ or such successor, as the case may be, shall, within 90 calendar days of its receipt of a written request therefor from Wave, at its sole cost, prepare and file all necessary documents with the SEC to effect a shelf registration and all Blue Sky qualifications and evidences of compliance as would permit or facilitate the public sale of Wave's Registrable Securities (defined below). "Registrable Securities" are securities received or receivable by Wave pursuant to the exercise, deemed exercise or redemption of a Stock Acquisition Right and any other securities issued as a dividend or other distribution with respect to or in exchange for such securities. Wave may make no more than two (2) requests for registration in any one (1) calendar year. i. If, following the exercise or deemed exercise by Wave at least one Stock Acquisition Right, Wave notifies BIZ or its successor in interest of its election to cause its Registrable Securities to be registered, BIZ or its successor in interest as the case may be shall, at its expense, use its diligent best efforts to effect all such registrations, qualifications and compliances as would permit or facilitate the public sale of Wave's Registrable Securities. 5. MERGER. In the event of a merger or combination, all the references in Section 4 of this Amendment to BIZ's securities shall, from the effective date of the merger or combination, be deemed to refer to the securities of BIZ's successor in interest. 6. EFFECT OF AMENDMENT. This Amendment shall be effective as of its date written above. All other terms and conditions of the Agreement shall remain in full force and effect except as modified by this Amendment. To the extent there is any conflict between this Amendment and the Agreement, this Amendment shall prevail. This Amendment shall be binding upon and shall inure to the benefit of the parties and their successors and assigns. IN WITNESS HEREOF, the parties hereto have executed the Amendment as of the date first written above. BIZ INTERACTIVE ZONE WAVE SYSTEMS CORP. By:________________________________ By:___________________________________ Authorized Officer Authorized Officer ___________________________________ ______________________________________ Print Name and Title Print Name and Title EX-99.H 5 exhibit-99d.txt TERMINATION AGREEMENTAND MUTUAL RELEASE EXHIBIT 99.D TERMINATION AGREEMENT AND MUTUAL RELEASE THIS TERMINATION AGREEMENT AND MUTUAL RELEASE (this "Agreement") is entered into as of the Effective Date (as defined below) by and among SSP Solutions, Inc., a Delaware corporation ("SSP"), and BIZ Interactive Zone, Inc., a Delaware corporation ("BIZ"), on the one hand, and Wave Systems Corp. ("Wave"), on the other. This Agreement is entered into with reference to the following facts: RECITALS On October 2, 2000, BIZ and Wave entered into a Purchase, Development, and Deployment Agreement ("Original Agreement"). BIZ and Wave amended the Original Agreement on May 10, 2001 ("Amended Agreement"). On August 24, 2001, BIZ became a wholly-owned subsidiary of SSP. SSP, BIZ and Wave desire to terminate the Original Agreement, as amended by the Amended Agreement (Original Agreement and Amended Agreement together, the "Existing Agreement"), on the terms set forth in this Agreement and to settle all claims and obligations that arise out of or that in any way are connected with or related to the Existing Agreement. The discussions between SSP, BIZ and Wave that lead to this Agreement began in late August 2002. Based upon the average 20-day trading price of the common stock of SSP ("Common Stock") during the period of discussions, SSP and Wave have agreed to use $1.35 as the conclusive value of a share of SSP Common Stock for purposes of this Agreement. As of August 31, 2002, Wave owned 3,083,083 shares of SSP Common Stock ("Investment Shares"). The shares of Common Stock to be issued pursuant to this Agreement are exclusive of Wave's Investment Shares. In consideration of the mutual covenants, agreements and promises set forth in this Agreement, and other good and valuable consideration, each party to this Agreement agrees as follows: TERMS 1. The foregoing Recitals shall be part of this Agreement. 2. The Existing Agreement (including any post termination covenants contained therein) is hereby canceled and terminated. Any and all obligations of SSP and BIZ to Wave for payment under the Existing Agreement are canceled, extinguished and forgiven by Wave. Any and all obligations of Wave to SSP or BIZ for services under the Existing Agreement are canceled, extinguished and forgiven by SSP and BIZ. All amounts previously paid by SSP or BIZ to Wave pursuant to the terms of the Existing Agreement are deemed validly paid and not subject to any adjustment or forfeiture. 3. Within fifteen business days following the execution of this Agreement, Wave will provide to SSP copies of the work developed to date on the Linux project. 4. Within ten business days following the execution of this Agreement, SSP shall deliver or cause to be delivered to Wave a certificate representing 1,600,000 shares ("Issued Shares") of Common Stock. 5. Within five business days following the execution of this Agreement, SSP shall deliver to Wave a convertible subordinated unsecured promissory note ("Note") dated as of September 30, 2002 in the principal amount of $270,000 in the form attached to this Agreement as Exhibit A, which note shall not bear interest and, subject to the limitations contained in the Note and this Agreement, shall be immediately convertible from time to time, at the option of Wave or SSP, into shares of Common Stock ("Note Shares") at the Rate (as defined below) then in effect. 6. For purposes of this section 6, the initial rate ("Rate") shall be $1.00. Following each adjustment, if any, of the Rate, SSP shall give prompt written notice to Wave setting forth in reasonable detail the calculation of the adjustment to the Rate and the calculation of the number of Adjustment Shares (as defined below), if any, issuable as of the Adjustment Date (as defined below). Within ten business days following each Adjustment Date, SSP shall deliver or cause to be delivered to Wave a certificate representing the Adjustment Shares, if any, issuable as of the Adjustment Date. (a) If and whenever after the date of this Agreement but before April 16, 2003, SSP issues or sells, or is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of SSP, but excluding shares of Common Stock issued or deemed pursuant to subsection 6(c) below to have been issued by SSP (i) upon exercise or conversion of exercisable or convertible securities issued or outstanding on or prior to the date of this Agreement or (ii) pursuant to transactions described in Section 8.5 of the Note) for a consideration per share less than the Rate in effect immediately prior to such issuance or sale (each an "Adjustment Date"), then the Rate shall be reduced to a price equal to the consideration per share paid for such Common Stock, and Wave shall be entitled to receive an additional number of shares of Common Stock ("Adjustment Shares") calculated as set forth in the following subsection 6(b). (b) The number of Adjustment Shares issuable upon an adjustment of the Rate made pursuant to subsection 6(a) above shall be equal to the Dilution Percentage (as defined below) multiplied by the sum of (i) the Issued Shares plus (ii) the Adjustment Shares, if any, issued prior to the Adjustment Date plus (iii) the Note Shares, if any, issued prior to the Adjustment Date. "Dilution Percentage" shall mean the percentage by which the Rate in effect immediately prior to the adjustment in question is reduced on the Adjustment Date. For example, if the Rate on October 31, 2002 is $1.00 and SSP issues shares of Common Stock on November 1, 2002 for $0.80 per share in a transaction not excluded from the applicability of subsection 6(a) above, then the Adjustment Date would be November 1, 2002, the Rate would be adjusted to $0.80 per share, the Dilution Percentage would be 20% (i.e., the difference between $1.00 and $0.80, divided by $1.00), and the number of Adjustment Shares issuable to Wave, assuming no Note Shares have yet been issued, would be 320,000 shares of Common Stock (i.e., 20% of 1,600,000). As a further example, if SSP also issued shares of Common Stock on November 2, 2002 for $0.75 per share in a transaction not excluded from the applicability of subsection 6(a) above, then the additional Adjustment Date would be November 2, 2002, the Rate would adjust from $0.80 to $0.75, the Dilution Percentage would be 6.25% (i.e., the difference between $0.80 and $0.75, divided by $0.80) and the number of Adjustment Shares issuable to Wave, assuming no Note Shares have yet been issued, would be 120,000 shares of Common Stock (i.e., 6.25% of the sum of 1,600,000 and 320,000). (c) For purposes of determining the adjusted Rate, the following shall apply: (i) "Options" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities (excluding rights, warrants or options granted pursuant to any SSP stock option and stock purchase plans), which rights, warrants or options are issued after the date of this Agreement. "Convertible Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or exercisable for Common Stock, which stock or securities are issued after the date of this Agreement. (ii) If, after the date of this Agreement, SSP in any manner grants any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exchange or exercise of any Convertible Securities issuable upon exercise of any such Option is less than the then applicable Rate, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by SSP at the time of the granting or sale of such Option for such price per share. For purposes of this subsection 6(c)(ii), the "lowest price per share for which one share of Common Stock is issuable upon exercise of such Options or upon conversion, exchange or exercise of such Convertible Securities" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by SSP with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Rate shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exchange or exercise of such Convertible Securities. (iii) If, after the date of this Agreement, SSP in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exchange or exercise thereof is less than the then applicable Rate, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by SSP at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this subsection 6(c)(iii), the "lowest price per share for which one share of Common Stock is issuable upon such conversion, exchange or exercise" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by SSP with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exchange or exercise of such Convertible Security. No further adjustment of the Rate shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Rate had been or are to be made pursuant to other provisions of this section, no further adjustment of the Rate shall be made by reason of such issue or sale. (iv) If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Rate in effect at the time of such change shall be adjusted to the Rate that would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. No adjustment shall be made if such adjustment would result in an increase of the Rate then in effect. (v) In case any Option is issued in connection with the issue or sale of other securities of SSP, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by SSP therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by SSP will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by SSP will be the Closing Sale Price (as defined below) of such securities on the date of receipt of such securities. If any Common Stock, Options or Convertible sSecurities are issued to the owners of the non-surviving entity in connection with any merger in which SSP is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by SSP and Wave. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within five business days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by SSP and Wave. The determination of such appraiser shall be final and binding upon all parties absent error, and the fees and expenses of such appraiser shall be borne equally by SSP and Wave. (vi) "Principal Market" means The Nasdaq National Market, or, if the Common Stock is not traded on The Nasdaq National Market, then the principal securities exchange or trading market for the Common Stock. "Closing Sale Price" means, for any security as of any date, the last closing trade price for such security on the Principal Market as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if the foregoing do not apply, the last closing trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing trade price is reported for such security by Bloomberg, the last closing ask price for such security as reported by Bloomberg, or, if no last closing ask price is reported for such security by Bloomberg, the average of the highest bid price and the lowest ask price of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot be calculated for that security on that date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by SSP and Wave. If SSP and Wave are unable to agree upon the fair market value of the Common Stock, then SSP shall immediately submit via facsimile the disputed determination of the fair market value to an independent, reputable investment banking firm. SSP shall cause the investment banking firm to perform the determinations or calculations and notify SSP and Wave of the results no later than 48 hours from the time it receives the disputed determinations or calculations. The investment banking firm's determination or calculation, as the case may be, shall be deemed conclusive absent manifest error, and the fees and expenses of such investment banking firm shall be borne equally by SSP and Wave. (vii) To the extent that any Options or Convertible Securities expire unexercised, the Rate then in effect shall be readjusted to the Rate that then would be in effect if such rights, options, warrants or convertible securities had not been issued, but such readjustment shall not affect the number of shares of Common Stock delivered upon any conversion or Rate adjustment prior to the date such readjustment is made. (d) Notwithstanding anything in this Agreement or the Note to the contrary, adjustments of the Rate and the issuance of the Issued Shares, Adjustment Shares and Note Shares shall be subject to the following limitations: (i) The parties acknowledge and agree that SSP is subject to Nasdaq rules that, among other things, restrict SSP from entering into transactions in which SSP may potentially issue shares of Common Stock without first obtaining stockholder approval and/or without first providing Nasdaq with notification and an opportunity to comment upon and/or approve the transactions. The parties further acknowledge that because of the inclusion of the anti- dilution provisions contained in Section 6 of this Agreement and in the Note: (A) SSP is required under Nasdaq rules to provide Nasdaq with 15 calendar days' prior written notification and an opportunity to comment upon and/or approve the transactions contemplated by this Agreement and the Note, and that such notification has not yet occurred; and (B) SSP may in the future be required to provide additional notifications to and/or obtain Nasdaq and/or stockholder approval of issuances of Common Stock under this Agreement or the Note. SSP agrees that SSP shall, as soon as practicable following the execution of this Agreement, provide notification to Nasdaq regarding SSP's entry into this transaction. To the extent SSP determines in the future that additional notifications to and/or approvals of Nasdaq and/or SSP's stockholders are required, SSP shall endeavor to make the notifications and/or obtain the approvals. The parties agree that to the extent that Nasdaq may from time to time require the modification or rescission of all or part of the terms of this Agreement and the Note, the parties shall negotiate in good faith with one another with the goal of arriving at revised terms that satisfy Nasdaq rules and put the parties in as close a position as possible to the positions intended by the original terms of this Agreement, including without limitation, the issuance of the greatest portion possible of the Issued Shares, Adjustment Shares and Note Shares that are or may become due in connection with this Agreement. (ii) SSP shall not issue to Wave under this Agreement and the Note an aggregate number of Issued Shares, Adjustment Shares and Note Shares that would result in Wave, together with its affiliates, beneficially owning as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and the rules promulgated thereunder) in excess of 19.9999% of the then issued and outstanding shares of Common Stock, including the Investment Shares, any other shares of SSP Common Stock that Wave then beneficially owns, and any shares issuable upon conversion or exercise of any instrument of SSP (including the Note) that Wave then beneficially owns after the application of this subsection 6(d)(ii) ("Maximum Aggregate Share Amount"). Wave will have the authority and obligation to determine whether the restriction contained in this subsection 6(d)(ii) will limit any particular issuance hereunder, and to the extent that Wave determines that the limitation contained in this subsection 6(d)(ii) applies, the determination of the amount of Adjustment Shares and/or Note Shares permitted to be issued shall be the responsibility and obligation of Wave. The provisions of this subsection (ii) may be waived by Wave in whole or in part upon not less than 61 days' prior written notice to SSP. If Wave has not delivered prior written notice of its waiver of this subsection 6(d)(ii) but has delivered a request that, without regard to any other shares that Wave or its affiliates may beneficially own, would result in the issuance in excess of the Maximum Aggregate Per Share Amount, SSP shall notify Wave of this fact and shall honor the request for the maximum amount permitted to be issued in accordance with this subsection 6(d)(ii) and the other provisions of this subsection 6(d)(ii). (iii) In no event shall an adjustment pursuant to this Section 6 reduce the Rate below the then par value, if any, of the shares of Common Stock issuable pursuant to the terms of this Agreement and the Note. 7. Wave shall, with respect to the Issued Shares, the Adjustment Shares and the Note Shares (collectively, the "Registrable Securities"), have registration rights as follows: (a) If SSP determines to file with the Securities and Exchange Commission ("SEC")a registration statement relating to an offering for the account of others under the Securities Act of 1933, as amended ("Securities Act"), of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans and other than in connection with an offering for the account of others pursuant to which SSP is prohibited by agreement with those others from including the Registrable Securities in the registration statement), SSP shall send to Wave written notice of such determination and, if within five business days after the effective date of such notice, Wave shall so request in writing, SSP shall include in such registration statement, if and when filed, all or any part of the Registrable Securities that Wave requests to be registered and that are not then included on a registration statement, except that if, in connection with any underwritten public offering the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock that may be included in the registration statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then SSP shall be obligated to include in the registration statement only such limited portion of the Registrable Securities with respect to which Wave has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the registration statement other than holders of securities entitled to inclusion of their securities in the registration statement by reason of demand registration rights. If an offering in connection with which Wave elects to participate in registration under this section is an underwritten offering, then Wave shall, unless otherwise agreed by SSP, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and on the same terms and conditions as other shares of Common Stock included in such underwritten offering. Wave shall have two opportunities to have the Registrable Securities registered under this subsection 7(a). (b) If on or before April 1, 2003, SSP shall not have filed with the SEC a registration statement upon which Wave was offered an opportunity to exercise Wave's incidental registration rights contained in the preceding paragraph, then Wave may, on any one occasion, send a written request to SSP to file under the Securities Act a registration statement covering the resale of not less than a majority of the Registrable Securities. SSP shall, as soon as practicable following receipt of the written request, prepare and file a registration statement covering the Registrable Securities requested to be registered and diligently pursue effectiveness of the registration statement. SSP shall use reasonable efforts to maintain the effectiveness of the registration statement until the Registrable Securities cease to be Registrable Securities. (c) All reasonable expenses (excluding underwriting discounts and commissions, transfer taxes and fees and disbursements of counsel for Wave) incurred by SSP in connection with registration of the Registrable Securities, including without limitation all registration, filing, listing, qualification, printers' and accounting fees, and fees and disbursements of counsel for SSP, shall be borne by SSP. (d) The shares of Common stock issued or issuable under this Agreement shall cease to be Registrable Securities when (i) such shares shall have been registered under the Securities Act, the registration statement with respect to the sale of such shares shall have become effective under the Securities Act and such shares shall have been disposed of pursuant to such effective registration statement, (ii) such shares shall have been sold or shall have become eligible for resale pursuant to Rule 144 (or any similar provision relating to the disposition of securities then in force) under the Securities Act, (iii) such shares shall have been otherwise transferred, new certificates or other evidences of ownership for them not bearing a legend restricting further transfer and not subject to any stop-transfer order or other restrictions on transfer shall have been delivered by SSP and subsequent disposition of such shares shall not require registration or qualification of such shares under the Securities Act or any state securities laws then in force, (iv) such shares shall cease to be outstanding, or (v) Wave shall have twice declined the opportunity under subsection 7(a) to include in a registration statement shares issued or issuable under this Agreement. (e) Wave promptly shall furnish in writing to SSP or its counsel such information as SSP or its counsel shall reasonably require in connection with a registration statement. (f) Indemnification. (i) SSP shall, notwithstanding any termination of this Agreement, indemnify and hold harmless Wave, and the agents, brokers and investment advisors of Wave, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses") (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising solely out of or based solely upon any untrue or alleged untrue statement of a material fact contained in the registration statement, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising solely out of or based solely upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions or alleged untrue statements or omissions are based upon information regarding Wave or such other Indemnified Party (as defined below) furnished in writing to SSP by Wave or such other Indemnified Party for use therein, or to the extent that such information relates to Wave or Wave's proposed method of distribution of Registrable Securities and was reviewed and approved by Wave for use in the registration statement, such prospectus or such form of prospectus or in any amendment or supplement thereto. (ii) Wave shall indemnify and hold harmless SSP, the directors, officers, agents and employees, each person who controls SSP (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, and the directors, officers, agents or employees of such controlling persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising solely out of or based solely upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, any prospectus, or any form of prospectus or form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising solely out of or based solely upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission or alleged untrue statement or omission is contained in any information so furnished in writing by Wave or other Indemnified Party to SSP for inclusion in the registration statement or such prospectus or to the extent that such information relates to Wave or Wave's proposed method of distribution of Registrable Securities and was reviewed and approved by Wave for use in the registration statement, such prospectus or such form of prospectus or in any amendment or supplement thereto. (iii) If any proceeding shall be brought or asserted against any person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. (iv) An Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such proceeding; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel (which counsel shall be reasonably acceptable to the Indemnifying Party) that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding. (v) All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this section) shall be paid to the Indemnified Party, as incurred, within ten (10) business days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled toindemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (vi) If a claim for indemnification under this section is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying, Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this section, any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this section was available to such party in accordance with its terms. (vii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (viii) The indemnity and contribution agreements contained in this section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 8. SSP, BIZ and Wave intend that the Issued Shares, the Adjustment Shares, the Note Shares and the Note (collectively the "Offered Securities"), are being issued in a private transaction intended to be exempt from the registration requirements of the Securities Act. Wave hereby represents and warrants to SSP and BIZ as follows: (a) Wave is an accredited investor (as defined in Rule 501 of Regulation D promulgated under the Securities Act) and is acquiring the Offered Securities for Wave's own account, for investment purposes only and not with a view to or for distributing or reselling such Offered Securities or any part thereof or interest therein, without prejudice, however, to Wave's right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Offered Securities in compliance with applicable federal and state securities laws. (b) Wave has significant investment experience, including investment in non-listed and non-registered securities, and Wave, either alone or together with Wave's representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Offered Securities, and has so evaluated the merits and risks of such investment. (c) Wave has received and had an opportunity to review SSP's Form 10-K for the year ended December 31, 2001, as amended, SSP's Form 10-Qs for the quarters ended March 31, 2002 and June 30, 2002, SSP's definitive proxy statement for its 2002 annual meeting of stockholders, and SSP's other filings made during 2002 under the Exchange Act. (d) Wave is able to bear the economic risk of an investment in the Offered Securities and, at the present time, is able to afford a complete loss of such investment. (e) Wave is not obtaining the Offered Securities as a result of or subsequent to any advertisement, article, notice or other communication regarding the Offered Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (f) Wave understands and acknowledges that (i) the Offered Securities are being offered and sold to Wave without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act, and (ii) the availability of such exemption depends in part on, and SSP will rely upon the accuracy and truthfulness of, the representations contained in this section, and Wave hereby consents to such reliance. (g) Wave consents to the placement of a legend on any certificates or other documents evidencing the Offered Securities stating that the issuance of the Offered Securities has not been registered under the Securities Act and under applicable state securities laws and setting forth or referring to the restrictions on transferability and sale thereof. (h) Waves understands that as a condition to the issuance of the Offered Securities, SSP may require him and any designee who is to receive Offered Securities to execute an investment representation letter or letters containing the representations in the preceding subsections of this section. 9. Except for any obligations imposed by this Agreement, SSP and BIZ, on the one hand, and Wave, on the other, and, as applicable, each of their respective agents, successors, predecessors, parent companies, affiliated companies, related companies, partners, officers, directors, shareholders, representatives, employees, attorneys, insurance companies, assigns and heirs, and each of them, past and present, hereby release and forever discharge each other party and each of his or its respective agents, successors, predecessors, parent companies, affiliated companies, related companies, partners, officers, directors, shareholders, representatives, employees, attorneys, insurance companies, assigns and heirs, and each of them, past and present, with respect to any and all claims, demands, liabilities, obligations, debts, attorneys' fees, costs, accounts, actions, or causes of action which any of the parties have or claim to have as of the date of this Agreement, in law or equity, whether known or unknown, which pertain to or which arise out of the facts, circumstances, and/or events which are asserted, in the Existing Agreement. 10. As a condition of this Agreement and in furtherance of the release provisions set forth in this Agreement, the parties expressly waive any and all rights and benefits conferred upon them by the provisions of section 1542 of the Civil Code of the State of California with respect to any of the matters described or set forth in this Agreement. Section 1542 of the Civil Code of the State of California states: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The parties acknowledge that except for matters expressly represented or recited in this Agreement, the facts and law in relation to this matter and the claims released by the terms of this Agreement may turn out to be different from the facts or law as now known to each party and/or its agents and/or representatives, including its counsel. Each party expressly assumes the risk of the existence of different or presently unknown facts or law and agrees that this Agreement shall in all respects be effective and binding as to each party despite the possibility of the existence of different or new facts or law. 11. Each of the parties represents and warrants that it has not heretofore assigned, transferred or subrogated, or purported to assign, transfer or subrogate, to any person or entity, any of the claims released in this Agreement. Each of the parties agrees that it shall indemnify each of the other parties, including with respect to any attorneys' fees and costs, and hold each of the other parties harmless from and against any claims based on or arising from any such assignment, transfer or subrogation, or any attempted assignment, transfer or subrogation, of any of the claims released in this Agreement. 12. Each of the parties agrees to execute and deliver to each other party all necessary documents and to take such additional action as may be necessary or reasonably required to effectuate the terms, conditions, provisions, and intent of this Agreement. 13. Each party executing this Agreement and/or any other documents related to the settlement between the parties represents and warrants that it has the legal capacity and/or has been duly authorized to execute this Agreement and any such other related documents. 14. Each of the parties acknowledges that it has carefully read this Agreementand knows and understands the contents and effect of this Agreement, and each of the parties further acknowledges that it is signing this Agreement based on its own free act. 15. Each of the parties acknowledges that it has been advised to seek legal counsel in connection with this matter and the provisions and execution of this Agreement, and each of the parties acknowledges that it either has consulted with its own legal counsel or has had a full opportunity to consult with its own legal counsel in connection with the settlement between the parties, the terms, conditions, and provisions of this Agreement, and the execution of this Agreement. 16. All of the terms, conditions and provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to choice of law principles. Any disputes arising under this Agreement shall be resolved in the federal or state courts located in the County of Orange, State of California. 17. If any term, condition or provision of this Agreement is held to be invalid, void or unenforceable, the remaining terms, conditions and provisions of this Agreement nevertheless shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 18. This Agreement and all of its terms, conditions and provisions shall be binding upon and shall inure to the benefit of each of the parties and each of the parties' respective heirs, successors and assigns. 19. The prevailing party in any proceeding to enforce the provisions of this Agreement shall be entitled to recover all costs, including reasonable attorneys' fees, from the non-prevailing party. 20. Each of the parties shall bear and be responsible for his or its own attorneys' fees and costs incurred in connection with all aspects of the Existing Agreement and such party's negotiation, execution and performance of this Agreement. 21. This Agreement, together with the Note, contains the entire agreement and understanding concerning the settlement between the parties and replaces any prior or contemporaneous negotiations or agreements between the parties, whether written and/or oral. 22. Each of the parties agrees that no particular party or parties to this Agreement shall be deemed to be the author of this Agreement or any particular term, provision or condition of this Agreement. Each of the parties further agrees that any ambiguities in this Agreement shall be resolved, and the terms, provisions and conditions of this Agreement shall be construed and interpreted, without regard to which party or parties may have suggested, drafted, revised, or otherwise authored this Agreement or any of its particular terms, provisions or conditions. Each of the parties further agrees that this Agreement shall be construed and interpreted as if drafted jointly by all of the parties. 23. It is understood that this Agreement is entered into in compromise of disputed claims and that neither the settlement between the parties nor the performance of any of the terms, provisions, or conditions of this Agreement shall be construed or interpreted as an admission of liability on the part of any of the parties to this Agreement. 24. This Agreement may not be changed, altered or modified except in a writing signed by each of the parties and/or duly authorized representatives of each of the parties. 25. This Agreement may be executed in counterparts, including facsimile counterparts, and all such executed counterparts, including with facsimile signatures, together shall constitute one original Agreement which shall be binding on all of the parties to this Agreement notwithstanding that all of the parties are not signatory to the original or the same counterparts. 26. If the release granted to any released party by any releasing party in this Agreement is held by a court of competent jurisdiction to be void or unenforceable, then the release given by that released party to that releasing party shall also be deemed void and unenforceable. 27. Any notice, demand, request, waiver or other communication required or permitted to be given under this Agreement shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to SSP: SSP Solutions, Inc. 17861 Cartwright Road Irvine, California 92614 Attention: Chief Financial Officer Telecopier: (949) 851-8588 Telephone: (949) 851-1085 with a copy (which copy shall not constitute notice to SSP) to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92626 Attention: Gregg Amber, Esq. Telecopier: (714) 546-9035 Telephone: (714) 641-5100 If to BIZ: BIZ Interactive Zone, Inc. 17861 Cartwright Road Irvine, California 92614 Attention: Chief Financial Officer Telecopier: (949) 851-8588 Telephone: (949) 851-1085 with a copy (which copy shall not constitute notice to BIZ) to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92626 Attention: Gregg Amber, Esq. Telecopier: (714) 546-9035 Telephone: (714) 641-5100 If to Wave: Wave Systems Corp. 480 Pleasant Street Lee, Massachusetts 01238 Attention: President Telecopier: (413) 243-0045 Telephone: (413) 243-7011 with a copy (which copy shall not constitute notice to Wave) to: Bingham McCutchen LLP 399 Park Avenue New York, New York 10022 Attention: Neil Townsend Telecopier: (212) 752-5378 Telephone: (212) 705-7722 Any party hereto may from time to time change its address for notices by giving at least ten (10) days' written notice of such changed address to the other parties hereto. 28. At such time as this Agreement has been signed by all of the parties to this Agreement and executed copies of this Agreement with all of the parties' signatures have been delivered to each of the other parties and/or their counsel, this Agreement shall be deemed to be effective as of August 31, 2002 (the "Effective Date"). Dated: As of September 30, 2002 SSP SOLUTIONS, INC. By:______________________________________ Thomas E. Schiff, Chief Financial Officer Dated: As of September 30, 2002 BIZ INTERACTIVE ZONE, INC. By:______________________________________ Thomas E. Schiff, Chief Financial Officer Dated: As of September 30, 2002 WAVE SYSTEMS CORP. By:______________________________________ Steven Sprague, President and Chief Executive Officer APPROVED AS TO FORM: RUTAN & TUCKER, LLP By:_________________________________ Gregg Amber Attorneys for SSP Solutions, Inc. and BIZ Interactive Zone, Inc. BINGHAM MCCUTCHEN LLP By:_________________________________ Neil Townsend Attorneys for Wave Systems Corp. -----END PRIVACY-ENHANCED MESSAGE-----