Exhibit 4.2
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
STOCK PURCHASE WARRANT
This Stock Purchase Warrant (this "Warrant"), dated March 11, 2003, is
issued to HSBC Global Custody Nominee (U.K.) Limited, Designation No. 896414, a
public limited company registered in England and Wales (the "Holder"), by
Integrated Security Systems, Inc., a Delaware corporation (the "Company").
1. Purchase of Shares. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at
the principal office of the Company (or at such other place as the Company shall
notify the holder hereof in writing), to purchase from the Company 1,250,000
fully paid and non-assessable shares of Common stock, no par value (the "Common
Stock"), of the Company (as adjusted pursuant to Section 7 hereof, the "Shares")
for the purchase price specified in Section 2 below.
2. Purchase Price. The purchase price for the Shares is $0.20 per
share. Such price shall be subject to adjustment pursuant to Section 7 hereof
(such price, as adjusted from time to time, is herein referred to as the
"Warrant Price").
3. Exercise Period. This Warrant is exercisable in whole or in part
at any time from the date hereof through March 11, 2008.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) surrender of this Warrant, together with a duly executed
copy of the form of Exercise Notice attached hereto, to the Secretary of
the Company at its principal officer, and the payment to the Company of
an amount equal to the aggregate purchase price for the number of Shares
being purchased; or
(b) if the Company's Common Stock is publicly traded as of such
date, the instruction to retain that number of Shares having a value
equal to the aggregate exercise price of the Shares as to which this
Warrant is being exercised and to issue to the Holder the remainder of
such Shares computed using the following formula:
Y(A-B)
X = ------
A
Where: X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock as to which this Warrant is
being exercised.
A = the fair market value of one share of Common Stock.
B = the Warrant Price.
As used herein, the "fair market value of one share of Common
Stock" shall mean:
(1) Except in the circumstances described in clause (2)
or (3) hereof, the closing price of the Company's Common Stock,
as reported in the WALL STREET JOURNAL, on the trading day
immediately prior to the date of exercise;
(2) If such exercise is in conjunction with a merger,
acquisition, or other consolidation pursuant to which the
Company is not the surviving entity, the value received by the
holders of the Common Stock pursuant to such transaction for
each share; or
(3) If such exercise is in conjunction with the initial
public offering of the Company, the price at which the Common
Stock is sold to the public in such offering.
5. Certificates for Shares. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter, and in
any event within thirty (30) days of the delivery of the subscription notice.
6 Reservation of Shares. The Company covenants that it will at all
times keep available such number of authorized shares of its Common Stock, free
from all preemptive rights with respect thereto, which will be sufficient to
permit the exercise of this Warrant for the full number of Shares specified
herein. The Company further covenants that such Shares, when issued pursuant to
the exercise of this Warrant, will be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof.
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7. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as follows:
(a) Stock Dividends, Subdivisions, Combinations and Other
Issuances. If the Company shall at any time prior to the expiration of
this Warrant subdivide its Common Stock, by stock split or otherwise,
combine its Common Stock or issue additional shares of its Common Stock
as a dividend with respect to any shares of its Common Stock, the number
of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend
and proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per share,
but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 7(a) shall become effective at the close
of business on the date the subdivision or combination becomes effective
or as of the record date of such dividend, or, in the event that no
record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization, Merger, Sale or
Consolidation. In the event of any reclassification, capital
reorganization or other change in the Common Stock of the Company (other
than as a result of a subdivision, combination or stock dividend
provided for in Section (a) above) or in the event of a consolidation or
merger of the Company with or into, or the sale of all or substantially
all of the properties and assets of the Company, to any person, and the
connection therewith consideration is payable to holders of Common Stock
in cash, securities or other property, then as a condition of such
reclassification, reorganization or change, consolidation, merger or
sale, lawful provision shall be made, and duly executed documents
evidencing the same shall be delivered to the Holder, so that the Holder
shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of
this Warrant immediately prior to such event, the kind and amount of
cash, securities or other property receivable in connection with such
reclassification, reorganization or change, consolidation, merger or
sale, by a holder of the same number of shares of Common Stock as were
exercisable by the Holder immediately prior to such reclassification,
reorganization or change, consolidation, merger or sale. In any such
case, appropriate provisions shall be made with respect to the rights
and interest of the Holder so that the provisions hereof shall
thereafter be applicable with respect to any cash, securities or
property deliverable upon exercise hereof. Notwithstanding the
foregoing, (i) if the Company merges or consolidates with, or sells all
or substantially all of its property and assets to, any other person,
and consideration is payable to holders of Common Stock in exchange for
their Common Stock in connection with such merger, consolidation or sale
which consists solely of cash, or (ii) in the event of the dissolution,
liquidation or winding up of the Company, then the Holder shall be
entitled to receive distributions on the date of such event on an equal
basis with holders of Common Stock as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of
such payment, if any, the rights of the Holder shall terminate and
cease, and this Warrant shall expire. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring person and,
in the event of any dissolution, liquidation or winding up of the
Company, the Company shall promptly, after receipt of this surrendered
Warrant, make payment by delivering a check in such amount as is
appropriate (or, in the case of consideration other than case, such
other consideration as is appropriate) to such person as it may be
directed in writing by the Holder surrendering this Warrant.
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(c) Certain Distributions. In case the Company shall fix a
record date for the making of a dividend or distribution of cash,
securities or property to all holders of Common Stock (excluding any
dividends or distributions referred to in Sections 7(a) or 7(b) above,
the number of Shares purchasable upon an exercise of this Warrant after
such record date shall be adjusted to equal the product obtained by
multiplying the number of Shares purchasable upon an exercise of this
Warrant immediately prior to such record date by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
distribution, and the denominator of which shall be the Warrant Price
immediately prior to such distribution, less the fair market value per
Share, as determined by the Holder, of the cash, securities or property
so distributed. Such adjustment shall be made successively whenever any
such distribution is made and shall become effective on the effective
date of distribution.
8. Pre-Exercise Rights. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares, including without limitation, the right to vote such Shares, receive
preemptive rights or be notified of shareholder meetings, and the Holder shall
not be entitled to any notice or other communication concerning the business or
affairs of the Company.
9. Restricted Securities. The Holder understands that this Warrant
and the Shares purchasable hereunder constitute "restricted securities" under
the federal securities laws inasmuch as they are being, or will be, acquired
from the Company in transactions not involving a public offering and accordingly
may not, under such laws and applicable regulations, be resold or transferred
without registration under the Securities Act of 1933, as amended, or an
applicable exemption from registration. In this connection, the Holder
acknowledges that Rule 144 of the Securities and Exchange Commission is not now,
and may not in the future be, available for resales of the Shares purchased
hereunder. The Holder further acknowledges that the Shares and any other
securities issued upon exercise of this Warrant shall bear a legend
substantially in the form of the legend appearing on the face hereof.
10. Certification of Investment Purpose. Unless a current
registration statement under the Securities Act of 1933, as amended, shall be in
effect with respect to the securities to be issued upon exercise of this
Warrant, the Holder hereof, by accepting this Warrant, covenants and agrees
that, at the time of exercise hereof, the Holder will deliver to the Company a
written certification that the securiti4es acquired by the Holder are acquired
for investment purposes only and that such securities are not acquired with a
view to, or for sale in connection with, any distribution thereof.
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11. Registration Rights. This Warrant and the Shares shall be
subject to the registration rights set forth in the Registration Rights
Agreement dated September 27, 2001, by and among the Holder and the Company, and
the Holder shall be entitled to all rights and benefits thereof.
12. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
and their respective successors and assigns.
13. Governing Law. This Warrant shall be governed by the laws of the
State of Texas, excluding the conflicts of laws provisions thereof.
INTEGRATED SECURITY SYSTEMS, INC.
By: /S/ C. A. XXXXXXX, JR.
-------------------------
C. A. Xxxxxxx, Jr.
Chairman and Chief Executive Officer
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EXERCISE NOTICE
Dated ______________, _______
The undersigned hereby irrevocably elects to exercise the Stock Purchase
Warrant, dated March 11, 2003, issued by Integrated Security Systems, Inc., a
Delaware corporation (the "Company") to the undersigned to the extent of
purchasing _______________ shares of Common Stock and hereby makes payment of
$____________ in payment of the aggregate Warrant Price of such Shares.
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: ___________________________________
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