EXHIBIT 10.1




 




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




 




A.            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.




B.            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.




C.            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.




D.            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.




E.             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.




 




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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




 




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$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




 




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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

Securities 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




 




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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




 




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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




 




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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




 




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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




 




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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




 




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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 to

indemnification 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.




 




10





























 




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.




 




11





























 




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




 




12





























 




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 Agreement and 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.




 




13





























 




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


  





 




14





























 




	

   


  	

  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 Dana


  
	

   


  	

  399 Park Avenue


  
	

   


  	

  New York, New

  York 10022


  
	

   


  	

  Attention: Neil

  Townsend


  
	

   


  	

  Telecopier:

  (212) 752-5378


  
	

   


  	

  Telephone: (212)

  318-7722


  





 




15





























 




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.




 




16





























 




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


  
					





 




17





























 




	

  APPROVED AS

  TO FORM:


  
	

   


  
	

  RUTAN &

  TUCKER, LLP


  
	

   


  
	

  By:


  	

   


  	

   


  
	

   


  	

  Gregg Amber


  
	

  Attorneys for

  SSP Solutions, Inc. and BIZ Interactive Zone, Inc.


  
	

   


  
	

   


  
	

  BINGHAM DANA


  
	

   


  
	

  By:


  	

   


  	

   


  
	

   


  	

  Neil Townsend


  
	

  Attorneys for

  Wave Systems Corp.


  
				





 




18