FILED BY SSP SOLUTIONS, INC. PURSUANT TO RULE 425
UNDER THE SECURITIES ACT OF 1933
SUBJECT CORPORATION: SSP SOLUTIONS, INC.
REGISTRATION STATEMENT NO.: 333-115552
COMMISSION FILE NO.: 000-26227
June 8, 2004
Dear Warrant Holder:
We are extending a Special Warrant Offer ("SWO") to warrant holders to
exercise their warrants at reduced prices. This offer is designed to raise funds
necessary to satisfy the cash reserve requirement to close our merger with
SAFLINK as well as provide meaningful capital for the combined company to
execute its growth strategy. However, should the merger not close, it is still
important that we build cash reserves through the SWO to pursue a number of
important strategic initiatives, even in the absence of the merger, that will
help us reach our full potential. Any holder of Series A-2 Warrants who desires
to take advantage of the SWO as it pertains to A-1 Warrants held by that holder
must exercise all Series A-2 Warrants held (at the reduced SWO price for those
warrants). The SWO is described in further detail in the enclosed Special
Warrant Offer Agreement.
The exercise price of the Series A-2 Warrants (which have an original
exercise price of $1.50 that will increase to $1.75 on July 22, 2004) will be
reduced to $1.25. The exercise price of the Series A-1 Warrants (which have an
original exercise price of $1.25 that will increase to $1.50 on July 22, 2004)
will be reduced to $1.00 for those Series A-1 Warrants exercised. For those
warrants not exercised, the warrant exercise prices will increase on July 22,
2004 as scheduled.
In making your decision to participate in the SWO, it is important that you
review all of the enclosed materials, as well as our SEC filings and press
releases. In this regard, we are enclosing for your review a copy of our
preliminary joint proxy statement/prospectus that was filed with the SEC on May
17, 2004 as part of a Form S-4 registration statement filed by SAFLINK. This
document provides a thorough description of both SSP and SAFLINK, as well as an
overview of the proposed merger and financial information about both companies.
Please note that this document is being delivered to you solely for purposes of
assisting you in deciding whether to participate in the SWO. We are NOT
soliciting your vote on the proposed merger or any other matter.
You should also note in the preliminary joint proxy
statement/prospectus the disclosure that the merger agreement with SAFLINK
requires that, as a condition to closing of the merger:
o SSP terminate employment agreements with Marvin Winkler, Kris
Shah and Tom Schiff;
o SSP make whatever payments to them are required to settle
related obligations to them with respect to those
terminations; and
o Messrs. Winkler, Shah and Schiff enter into new agreements
with SAFLINK.
The terms of those existing agreement termination settlements and new agreements
are still being negotiated. However, you should be aware that the final terms
could involve significant payments by SSP to Messrs. Winkler, Shah and Schiff
immediately prior to the closing of the merger. While none of the funds from the
SWO will be earmarked for these payments, or any other specific initiative, any
payments to Messrs. Winkler, Shah and Schiff will come from our general working
capital, of which the SWO funds will constitute a significant portion.
We believe that this SWO is in the best interest of all of our stock
and warrant holders. Thank you for your continued support and consideration of
this offer.
Sincerely,
Marvin J. Winkler, CEO
2
SPECIAL WARRANT OFFER AGREEMENT
This Special Warrant Offer Agreement ("AGREEMENT") is made and entered
into as of this 8th day of June, 2004, by and between SSP Solutions, Inc., a
Delaware corporation (the "COMPANY"), and the investor identified on the
signature page hereto (the "INVESTOR") with regard to the following:
RECITALS
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WHEREAS, the parties hereto entered into a Securities Purchase
Agreement dated as of November 19, 2003, and/or a Bridge Loan Agreement dated as
of September 1, 2003, for purposes of setting forth the terms and conditions
relating to the issuance and sale of various securities, including Warrants to
Purchase Common Stock issued pursuant to that agreement, (collectively,
"ORIGINAL WARRANTS" or "WARRANTS"); and
WHEREAS, the parties wish to modify the terms of the Amended Warrants
in the manner and to the extent set forth herein and the Investor wishes to
exercise the Amended Warrants for cash on the terms and conditions described
herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration for the premises and mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. SPECIAL WARRANT OFFER. The terms of the Investor's Original
Warrants are hereby modified and amended so as to reduce the exercise price of
the Warrants such that the exercise price for the shares purchasable upon
exercise of the Warrants (the "WARRANT SHARES") shall be reduced to $1.25 per
share for the Warrants identified as "Series A-2 Warrants" and $1.00 per share
for all of the other Warrants (as applicable, "SPECIAL EXERCISE PRICE") subject
to exercise of the Series A-2 Warrants in their entirety (at the Special
Exercise Price) and receipt by the Company of payment in full of the Investor's
aggregate Special Exercise Price, on or before June 21, 2004 ("SPECIAL WARRANT
OFFER").
2. PAYMENT OF SPECIAL EXERCISE PRICE. In order for the Investor to
effect a valid exercise under this Agreement and the Amended Warrant, the
Company must receive (a) an executed copy of this Agreement, (b) payment in full
of the applicable total aggregate Special Exercise Price, (c) a fully completed
and executed Form of Election to Purchase in the form attached hereto as EXHIBIT
A, and (d) if DWAC delivery is desired, a fully completed and executed
Acknowledgment of Restricted Status and Verification of Delivery Information in
the form attached hereto as EXHIBIT B, no later than 5:00 p.m., Pacific Standard
Time, on June 21, 2004.
3. NO ANTI-DILUTION EFFECT. Any and all Warrants owned by the Investor
are hereby modified and amended to provide that there will be no adjustments to
the exercise price of those Warrants (other than the reduction to $1.00 or $1.25
per share, as the case may be, as provided in SECTION 1) as a result of the
reduction in the exercise price, pursuant to the Special Warrant Offer, of any
other warrants issued by the Company, and all anti-dilution rights with respect
to any and all Warrants owned by the Investor are hereby waived to the extent
that they might become operable as a result of the Special Warrant Offer.
3
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company that:
4.1 INVESTMENT PURPOSE. Upon exercise of the Warrants, the
Investor will acquire the Warrant Shares issuable upon exercise thereof for the
Investor's own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
4.2 ACCREDITED INVESTOR STATUS. The Investor is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act.
4.3 RELIANCE ON EXEMPTIONS. The Investor understands that the
Special Warrant Offer is being made to the Investor in reliance on specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying in part upon the truth and
accuracy of, and the Investor's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Investor set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Warrant Shares pursuant to the
Special Warrant Offer.
4.4 INFORMATION. The Investor and the Investor's advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company, including, without limitation, the information
required to be delivered to the Investors under Rule 502(b)(2) of Regulation D,
and any other materials relating to the Special Warrant Offer that have been
requested by the Investor. The Investor and the Investor's advisors, if any,
have been afforded the opportunity to ask questions of the Company. The Investor
understands that the Investor's investment in the Warrant Shares involves a high
degree of risk. The Investor has sought such accounting, legal and tax advice as
the Investor has considered necessary to make an informed investment decision
with respect to the Investor's acquisition of the Warrant Shares.
4.5 NO GOVERNMENTAL REVIEW. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Warrant
Shares or the fairness or suitability of the investment in the Warrant Shares
nor have such authorities passed upon or endorsed the merits of the offering of
the Warrant Shares.
4.6 AUTHORIZATION; ENFORCEMENT; VALIDITY. This Agreement has
been duly and validly authorized, executed and delivered on behalf of the
Investor and is a valid and binding agreement of the Investor enforceable
against the Investor in accordance with its terms, subject as to enforceability
to general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
4.7 RESIDENCY. The Investor is a resident of that jurisdiction
specified in its address set forth on the signature page of this Agreement.
4
4.8 NO SHORT SALES. Between the date of receipt of the SWO
and the closing date of the proposed merger between the Company and SAFLINK
Corporation, the Investor will not "sell short" or otherwise take any "short"
positions in the stock of either the Company or SAFLINK Corporation. The
Investor will not offer, sell, transfer or otherwise dispose of any Common Stock
obtained on exercise of the Investor's Warrants, except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
4.9 SEC REQUIRED LEGEND. INVESTOR ACKNOWLEDGES THAT SAFLINK
AND THE COMPANY HAVE FILED A JOINT PROXY STATEMENT/PROSPECTUS WITH THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") IN CONNECTION WITH THEIR PENDING
MERGER TRANSACTION. IN ADDITION, SAFLINK AND THE COMPANY HAVE FILED AND WILL
FILE OTHER INFORMATION AND DOCUMENTS CONCERNING THE MERGER AND THEIR RESPECTIVE
BUSINESSES WITH THE SEC. THE COMPANY URGES INVESTOR TO REVIEW THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER INFORMATION FILED AND TO BE FILED WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. ANY OFFER OF
SECURITIES IN THE MERGER WILL ONLY BE MADE PURSUANT TO THE JOINT PROXY
STATEMENT/PROSPECTUS. THESE DOCUMENTS WILL BE AVAILABLE WITHOUT CHARGE ON THE
SEC'S WEB SITE AT WWW.SEC.GOV AND MAY BE OBTAINED WITHOUT CHARGE FROM THE SEC AT
TELEPHONE NUMBER 800-SEC-0330. A COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS
HAS BEEN PROVIDED TO INVESTOR BY THE COMPANY. INVESTOR SHOULD READ THE JOINT
PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING ANY INVESTMENT DECISIONS.
5. EFFECT. Except as otherwise set forth in this Agreement, the
Investor's Warrants shall remain in full force and effect in accordance with
their terms, including, with respect to any unexercised Warrants (or portions
thereof) an increase in the exercise price of any remaining Warrants to $1.50
per share on July 22, 2004.
6. ENTIRE AGREEMENT. Except as set forth in SECTION 4, this Agreement
(including Exhibits hereto) contains the entire agreement between the parties
with respect to the Special Warrant Offer and amendment of the Investor's
Warrants and supersedes all prior agreements, written or oral, with respect
thereto.
7. GOVERNING LAW. This agreement shall be governed by, construed under
and enforced in accordance with the laws of the State of Delaware without regard
to any conflict of law principles thereof.
8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
5
IN WITNESS WHEREOF, the parties have caused this Special Warrant Offer
Agreement to be executed as of the day and year first above written.
SSP SOLUTIONS, INC.
By:
---------------------------------
Marvin J. Winkler, CEO
INVESTOR
[PRINT NAME]
By:
---------------------------------
Title:
------------------------------
6
EXHIBIT A
FORM OF ELECTION TO PURCHASE PURSUANT TO SPECIAL WARRANT OFFER
--------------------------------------------------------------
(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under an SSP Warrant pursuant to the Special Warrant Offer)
To SSP Solutions, Inc.:
In accordance with the Warrant to Purchase Common Stock of SSP
Solutions, Inc. ("WARRANT") enclosed with this Form of Election to Purchase, the
undersigned hereby irrevocably elects to purchase _____ shares of Common Stock
("COMMON STOCK"), $.01 par value per share, of SSP Solutions, Inc. and encloses
herewith $______ in cashier's check (or via wire transfer), which sum
represents the aggregate Exercise Price (as defined in the Special Warrant
Offer) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
|_| Provided the undersigned also submits a completed copy of Exhibit B
attached hereto, the undersigned requests that the Company cause its
transfer agent to electronically transmit the Common Stock issuable
pursuant to this Special Notice of Exercise to the account of the
undersigned or its nominee, in accordance with the instructions below,
with DTC through its Deposit Withdrawal Agent Commission System ("DTC
TRANSFER"), provided that such transfer agent participates in the DTC
Fast Automated Securities Transfer program.
Clearing Firm Name:
---------------------------------
Clearing Firm DTC #:
--------------------------------
Account Name:
---------------------------------------
Account Number:
-------------------------------------
|_| In lieu of receiving the shares of Common Stock issuable pursuant to
this Special Notice of Exercise by way of DTC Transfer, the undersigned
hereby requests that the Company cause its transfer agent to issue and
deliver to the undersigned physical certificates representing such
shares of Common Stock at the address set forth below:
---------------------------
Printed Name of Holder
Address:
------------------
------------------
------------------
If you wire transfer funds to cover the purchase, please use the
following wire transfer instructions and complete the area below:
A-1
1. Please wire funds to SSP's account at First Bank & Trust for
SSP Solutions, Inc., First Bank & Trust Costa Mesa, California
92626. The routing number is 081009428, and the account number
is 1463064491. If you need additional information, the phone
number for the Bank is (714) 668-3090 and the phone number for
SSP is (949) 851-1085.
2. Please be sure the name on the wire transfer is the same as
the name on the Warrant in order to accurately identify the
source of the transaction.
Funds are being wired on the following date:____________________________________
The following Bank will initiate wire transfer:_________________________________
(Please include name and city and state of Bank)
Bank cashier's checks should be sent to SSP Solutions, Inc., 17861 Cartwright
Road, Irvine, CA 92614. Please note that for payments by cashier's checks,
Common Stock certificates cannot be issued for five business days after the date
of deposit.
If the number of shares of Common Stock issuable upon this exercise is not all
of the shares of Common Stock which the undersigned is entitled to purchase in
accordance with the enclosed Warrant, the undersigned requests that a new
warrant containing the terms of the Original Warrant and evidencing the right to
purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Dated: June __, 2004 Name of Holder:
(Print)____________________________________
By: _______________________________________
Name:______________________________________
Title:_____________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
A-2
EXHIBIT B
SSP SOLUTIONS, INC.
ACKNOWLEDGMENT OF RESTRICTED STATUS AND
VERIFICATION OF DELIVERY INFORMATION
The undersigned acknowledges and agrees that all offers and sales by
the undersigned of the common stock issued or issuable to the undersigned upon
exercise of warrants to purchase common stock of SSP Solutions, Inc. ("SSP")
have been or will be made only:
(i) by a selling security holder listed in or covered by the final
prospectus relating to Form S-3 Registration Statement No. 333-111402, as
amended, supplemented or replaced from time to time ("Prospectus"), and if the
selling security holder is not a natural person, only by one or more of the
persons named in the Prospectus as having dispositive power over the shares; and
(ii) in a manner described under the captioned "Plan of Distribution"
in the Prospectus; and
(iii) in a manner whereby the undersigned and the undersigned's broker
have complied with all applicable prospectus delivery requirements (including
those contained in Section 5(b) of the Securities Act of 1933, as amended); and
(iv) at a time or times when the undersigned (x) is not in possession
of material non-public information at the time of the offer and sale and (y) has
confirmed that the Prospectus was effective at the time of the offer and sale.
The undersigned further acknowledges and agrees that:
(A) SSP, Rutan & Tucker, LLP (SSP's counsel), and American Stock
Transfer & Trust Company (SSP's transfer agent) are entitled to rely on this
letter in connection with transfers by the undersigned of shares covered by the
Prospectus; and
(B) The undersigned will send, or cause its broker to send, to SSP and
SSP's counsel at the facsimile numbers and/or addresses below a letter stating
the number of shares of common stock that have been sold and stating that those
shares have been sold in compliance with applicable prospectus delivery
requirements and state securities law requirements and in accordance with the
Plan of Distribution.
Rutan & Tucker, LLP SSP Solutions, Inc.
611 Anton Boulevard, Suite 1400 17861 Cartwright Road
Costa Mesa, CA 92626 Irvine, California 92614
Fax: (714) 546-9035 Fax: (949) 622-3660
Phone: (714) 641-5100 Phone: (949) 851-1085
Attention: Cristy Parker, Esq. Attention: Thomas E. Schiff
B-1
The undersigned requests that the following registration address be
placed on stock certificates and be used for mailing of stockholder
communications and mailing of cash dividends:
_______________________________________________________________________
_______________________________________________________________________
The undersigned further requests that issuances of shares to the
undersigned in payment of dividends or upon exercise of warrants to purchase
common stock of SSP be made as follows (check one and provide relevant
information):
____ To the following address for delivery of physical stock
certificates:
_______________________________________________________________________
_______________________________________________________________________
____ To the account of the undersigned or its nominee through the
DTC's Deposit Withdrawal Agent Commission System (DWAC):
_______________________________________________________________________
_______________________________________________________________________
___________________________________________
Signature
___________________________________________
Print Name
___________________________________________
Title of Signer (if signing for entity)
___________________________________________
Name of Entity (if signing for entity)
___________________________________________
Telephone Number of Signer
___________________________________________
Fax Number of Signer
___________________________________________
Internet e-mail Address of Signer
Date:______________________________________
B-2